GCP STUDENT LIVING PLC
LEI: 2138004J4ID66FK38H25
ANNUAL REPORT AND CONSOLIDATED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 30
JUNE 2017
GCP Student Living plc, (the “Company” or together with its
subsidiaries, the "Group"), which was the first student
accommodation REIT in the UK, today announces its results for the
financial year ended 30 June
2017.
The full annual report and financial statements and the Notice
of the AGM can be accessed via the Company's website at
www.graviscapital.com/funds/gcp-student or by contacting the
Company Secretary by telephone on 01392 477500.
AT A GLANCE
|
2015 |
2016 |
2017 |
Revenue for the year |
£11.5m |
£22.5m |
£28.6m |
Net operating margin |
78% |
79% |
79% |
Rental growth |
3.6% |
4.5% |
3.9% |
Annualised shareholder return since IPO |
18.1% |
13.9% |
14.2% |
Dividends per ordinary share for the year |
5.60p |
5.66p |
5.75p |
EPRA NAV per ordinary share |
125.51p |
136.93p |
139.08p |
Share price per ordinary share |
129.25p |
130.75p |
145.00p |
Value of property portfolio |
£177.2m |
£424.8m |
£634.6m |
HIGHLIGHTS
-
The Company delivered a robust set of results generating total
revenue for the year of £28.6 million.
-
Annualised shareholder returns since IPO of 14.2%, in excess of
the Company’s target return of 8-10%.
-
The Company successfully raised £103.6 million through two
oversubscribed placings of ordinary shares.
-
Dividends of 5.75 pence per
ordinary share for the period in line with target.
-
NAV (cum income) per ordinary share of 139.08 pence and NAV (ex-income) per ordinary
share of 137.62 pence at
30 June 2017.
-
The Company’s properties continue to benefit from the
supply/demand imbalance for high-quality, modern student facilities
in London, with all properties
fully occupied and rental growth of 3.9% for the 2016/17 academic
year.
-
The Company completed the acquisition of Woburn Place,
London WC1, which following
refurbishment ahead of the 2018/19 academic year, is expected to
provide c.420 beds.
-
At 30 June 2017, the portfolio
comprised eight student accommodation assets, primarily in and
around London, with c.3,000 beds
which were either operational or expected to complete construction
or refurbishment over the next two academic years. The portfolio
valuation at that date was £634.6 million.
-
On 16 September 2016, the Company
completed its Migration to a premium listing on the Official List
of the UKLA. Trading in its ordinary shares was transferred from
the SFS to the Premium Segment of the Main Market of the LSE with
effect from that date.
-
During the period, the Company was admitted by the FTSE Group to
the FTSE All Share and FTSE EPRA/NAREIT Global Real Estate indices,
which has broadened the Company’s appeal to a wider range
of investors.
-
Post year end, the Company’s first forward-funded development at
Scape Wembley, London, completed
on schedule for the 2017/18 academic year, providing a further
c.580 beds.
Robert
Peto, Chairman, commented:
“I am pleased to report a year of continued positive
performance. The Company has grown its dividend to 5.75 pence per ordinary share in respect of the
year and delivered annualised total returns since IPO in 2013 of
14.2%, exceeding its long term target of 8-10% per annum.
The Company’s core focus on student residential accommodation
assets located in and around London, where, at the year end, 97% of the
value of the portfolio was located, coupled with conservative
levels of borrowings, provides shareholders with a portfolio of
properties which benefit from strong supply and demand
characteristics, which is the primary driver of rental growth in
the sector and underpins the Company’s attractive income
characteristics.
The two oversubscribed capital raises over the period are a
reflection of the strong ongoing support for the Company’s
investment mandate by new and existing investors alike, with
admission to the FTSE All-Share and EPRA/NAREIT Global REIT indices
further broadening the Company’s appeal.
Demand from overseas students for private student residential
accommodation in the Company’s core market is likely to remain
resilient relative to the rest of the UK given the attractions of
London as a cosmopolitan, global
centre of academic excellence. The Company continues to deliver on
its objectives and its portfolio remains well positioned to provide
shareholders with regular, sustainable dividends that should
continue to grow over the long term.”
For further information, please contact:
Gravis Capital Management
Limited
+44 20 3405 8500
Tom Ward
tom.ward@graviscapital.com
Nick Barker
nick.barker@graviscapital.com
Dion Di
Miceli dion.dimiceli@graviscapital.com
Stifel Nicolaus Europe
Limited
+44 20 7710 7600
Neil
Winward
neil.winward@stifel.com
Mark
Young
mark.young@stifel.com
Tom
Yeadon
tom.yeadon@stifel.com
Buchanan
+44 20 7466
5000
Charles
Ryland
charlesr@buchanan.uk.com
Vicky
Hayns
victoriah@buchanan.uk.com
ABOUT US
GCP Student Living plc was the first real estate investment
trust in the UK to focus on student residential assets. The Company
invests in modern, private student residential accommodation and
teaching facilities located primarily in and around London.
Our primary objective is to provide shareholders with attractive
total returns in the longer term through the potential for modest
capital appreciation and regular, sustainable, long-term dividends
with RPI inflation-linked income characteristics.
The Company invests in properties located primarily in and
around London where the Investment
Manager believes the Company is likely to benefit from supply and
demand imbalances and a growing number of international
students.
The Company is a closed-ended investment company incorporated in
England and Wales, and its shares trade on the
Premium Segment of the Main Market of the LSE.
INVESTMENT OBJECTIVES
The Company invests in UK student accommodation to meet the
following key objectives:
Dividend income
To provide shareholders with regular, sustainable, long-term
dividends, with RPI inflation-linked characteristics.
The Company has paid a total of 5.75 pence per ordinary
share in dividends for the year, increasing the Company’s dividend
year-on-year.
Capital appreciation
To provide modest capital appreciation over the long term.
The valuation of the Company’s property portfolio has increased
by 2.8% over the year driven by a combination of uplifts in
valuation on acquisition, increasing rental rates and yield
compression.
Portfolio quality
Focus on high-quality, modern, private student residential
accommodation and teaching facilities for students studying at
leading academic institutions primarily in and around London.
At 30 June 2017, the Company’s
property portfolio comprised eight modern standing student
accommodation buildings, and one development, of which 97% of the
value is located in and around London.
Dividends
paid for the year |
5.75p |
Annualised dividend
growth |
1.6% |
Capital
appreciation |
2.8% |
Value of property
portfolio |
£634.6m |
Occupancy for 2016/17
academic year |
FULL |
Rental growth |
3.9% |
CHAIRMAN’S STATEMENT
Full occupancy, strong rental growth and valuation uplifts have
all contributed to a robust set of financial results for the
year.
Introduction
On behalf of the Board, I am pleased to report a year of continued
positive performance against a backdrop of wider macroeconomic
turmoil.
It has been another busy year for the Company with the
acquisition of two new assets, two equity fundraisings, a new
borrowing facility and a move to the Premium Segment of the LSE.
Since the year end, one further property has been purchased, about
which further details are provided below.
Through strong rental growth across its portfolio, the Company
grew its dividend by 1.6% to 5.75
pence per ordinary share over the year. Shareholders have
received an annualised total return of 14.2% since May 2013 when the Company was launched, exceeding
its target of 8-10% per annum.
Portfolio
At year end, the portfolio comprised eight
student accommodation assets, primarily in and around
London, with c.3,000 beds. The
properties are predominantly occupied by international students and
offer modern, high specification facilities.
The portfolio, which is primarily located in and around
London, was independently valued
at £634.6 million as at 30 June 2017,
which represented an uplift in value over the year of 2.8%. This
valuation increase has been driven by rising rental rates, uplifts
in valuation on funded developments and investment demand for
student accommodation driving upward pressure on asset prices
across the sector. The blended net initial yield on the Company’s
portfolio of standing assets was 5.00% as at the year end.
Post year end, the Company has completed on the acquisition of
one further property adding 450 beds to its portfolio.
Acquisitions
During the year, the Company acquired two properties - Woburn Place
and Scape Wembley.
Woburn Place is located in Bloomsbury, a prime central
London location within short
walking distance of several globally recognised universities. It
was acquired as a standing investment where the Investment Manager
has identified the opportunity for a major refurbishment ahead
of the 2018/19 academic year, where it is expected to provide a
further c.420 beds.
Scape Wembley was acquired as a forward-funded development, with
the Company acquiring the land and subsequently funding
construction of the property. Scape Wembley was opened to students
in August 2017, adding a further 580
modern beds to the Company’s portfolio.
Post year end, the Company completed on the acquisition of
Circus Street, Brighton, which
will provide further portfolio diversification.
Circus Street, the Company’s second forward-funded development
asset, is expected to provide around 450 beds and 30,000 square
feet of commercial office space in central Brighton ahead of the 2018/19 academic year.
Whilst outside of the Company’s core market, the Directors believe
that Brighton demonstrates many of
the characteristics of the London
market including strong demand with high numbers of international
students and significant supply constraints.
Investments through future contractual arrangements such as
forward-funding agreements enable the Company to secure properties
at attractive valuations relative to acquiring standing assets
which are already operational and income producing. In addition,
they provide an opportunity for the Company to acquire properties
in areas where suitable modern purpose-built student accommodation
assets may be unavailable. It is encouraging that the Company has
benefitted from such arrangements resulting in modest valuation
uplifts at the time the purchase is completed.
Financial results
Full occupancy, strong rental growth and valuation uplifts
have all contributed to a robust set of financial results for the
year. The EPRA NAV per ordinary share increased by 1.6%, from
136.93 pence to 139.08 pence at 30 June 2017.
The Company’s property
portfolio generated £28.6 million of rental income,
delivering an operating profit (including valuation gains) of
£28.3 million (£16.5 million excluding valuation gains).
Dividends
The Company paid dividends in respect of the financial year ended
30 June 2017 of 5.75 pence per ordinary share. The dividends were
paid as 4.92 pence per ordinary share as a REIT PID and
0.83 pence per ordinary share as an
ordinary UK dividend. The Company has increased its dividend by
1.6% year-on-year.
Financing
The Company conducted two oversubscribed capital raises during the
period, raising gross proceeds of £103.6 million which have been
used in funding the construction of Scape Wembley and
acquisition of Woburn Place.
The Board is also pleased to note the Company has reduced its
blended cost of borrowing to 2.96% during the period, having
entered into new banking facilities with its lender, PGIM. As at
30 June 2017, the Company’s borrowing facilities totalled
£235 million, of which £220 million was drawn with an average
weighted maturity at that date of c.8 years. The loan-to-value of
the Group at that date was approximately 32%.
Migration and FTSE Indices
During the period, the Company completed the Migration of its
listing to the Official List of the UKLA and to trading on the
Premium Segment of the Main Market of the LSE. Subsequently, the
Company was admitted to the FTSE All Share, FTSE Small Cap and
FTSE EPRA/NAREIT Global Real Estate indices. This has broadened the
investor appeal of the Company, further enhancing the market
liquidity of its shares as it has grown.
Outlook
The Company’s focus on student residential accommodation assets
located in and around London,
coupled with a conservative level of borrowings, provides
shareholders with a property portfolio with attractive income
characteristics.
The Investment Manager remains focused on delivering a portfolio
of properties which benefit from strong supply and demand
characteristics, which it believes is the primary driver of rental
growth in the sector. Consequently, whilst the Company’s portfolio
remains London-centric, from time
to time, properties may be added outside of this market where the
sector fundamentals mirror that of the London market. By way of illustration, the
Company’s acquisition in Brighton
can be seen in the wider context of a local market with substantial
supply constraints, strong demand from the c.36,000 students at the
two Brighton universities with
c.6,100 international students and limited choice of high quality
accommodation currently available.
The number of new schemes due for development in London over the next few years remains at a
historic low. Planning approvals and development tax (the community
infrastructure levy) on student accommodation continue to make it
difficult to bring new developments in and around London on stream. In this context, the
Investment Manager has been successful in securing new, modern
properties through forward-funding or forward-purchase agreements,
effectively enabling the Company to create its own pipeline of
modern assets where good quality standing investments are difficult
to acquire.
Demand from overseas students for private sector student
accommodation in the Company’s core market is likely to remain
resilient relative to the rest of the UK given the number of
overseas students in London and
its perception as a global centre of academic excellence.
Depreciation in the value of sterling may further serve to enhance
the UK’s competitiveness for overseas students although the Brexit
negotiations may deter some students from applying to UK
universities whilst new controls on immigration remain unclear.
We are living through turbulent and uncertain times, but the
Company has continued to deliver on its objectives and its
portfolio remains well positioned to provide shareholders with
regular, sustainable, dividends that should continue to
grow over the long term.
Robert Peto
Chairman
14 September 2017
STRATEGIC REPORT
STRATEGIC OVERVIEW
The Company’s investment objective is to provide shareholders
with attractive total returns in the longer term through the
potential for modest capital appreciation and regular, sustainable,
long-term dividends with RPI inflation-linked characteristics.
Investment policy
The Company intends to meet its investment objective through
owning, leasing and licensing student residential accommodation and
teaching facilities to a diversified portfolio of direct let
tenants and HEIs. The Company will mostly invest in modern, purpose
built, private student residential accommodation and teaching
facilities located primarily in and around London where the Investment Manager believes
the Company is likely to benefit from supply and demand imbalances
for student residential accommodation. The Company may also invest
in development and forward-funded projects which are consistent
with the objective of providing shareholders with regular,
sustainable dividends and have received planning permission for
student accommodation, subject to the Board being satisfied as to
the reputation, track record and financial strength of the relevant
developer and building contractor.
Rental income will predominantly derive from a mix of
contractual arrangements including direct leases and/or licences to
students (direct let agreements), leases and/or licences to
students guaranteed by HEIs and/or leases and/or licences directly
to HEIs. The Company may enter into soft nominations agreements
(pari passu marketing arrangements with HEIs to place their
students in private accommodation) or hard nominations agreements
(longer-term marketing arrangements with HEIs of between two and 30
years in duration). Where the Company invests in properties which
contain commercial or retail space, it may derive further income
through leases of such space. Where the Company invests in
development and forward-funded projects, development costs will
typically be paid in stages through construction, with a bullet
payment at completion.
The Company intends to focus primarily on accommodation and
teaching facilities for students studying at Russell Group
universities and other leading academic institutions, regional
universities with satellite teaching facilities in and around
London and at specialist
colleges.
The Company may invest directly or through holdings in special
purpose vehicles and its assets may be held through limited
partnerships, trusts or other vehicles with third party
co-investors.
Borrowing and gearing policy
The Company may seek to use gearing to enhance returns over the
long term. The level of gearing will be governed by careful
consideration of the cost of borrowing and the Company may seek to
use hedging or otherwise seek to mitigate the risk of interest rate
increases. Gearing, represented by borrowings as a percentage of
gross assets, will not exceed 55% at the time of investment. It is
the Directors’ current intention to target gearing of less than 30%
of gross assets in the long term and to comply with the REIT
condition relating to the ratio between the Group’s property
profits and property finance costs. Details of the Company’s
borrowings are given in note 19.
Use of derivatives
The Company may invest through derivatives for efficient
portfolio management. In particular, the Company may engage in
interest rate hedging or otherwise seek to mitigate the risk of
interest rate increases as part of the Company’s efficient
portfolio management.
Investment restrictions
The Company invests and manages its assets with the objective of
spreading risk through the following restrictions:
-
the Company will derive its rental income from a portfolio of
not less than 500 studios;
-
the value of any newly acquired single property will be limited
to 25% of gross assets, calculated as at the time of
investment;
-
the Company mostly invests in modern, purpose-built, private
student residential accommodation and teaching facilities located
primarily in and around London.
Accordingly, no less than 75% of the Group’s property portfolio
will comprise assets which are located in and around London, calculated as at the time of
investment;
-
at least 90% by value of the properties directly or indirectly
owned by the Company shall be in the form of freehold or long
leasehold (over 60 years remaining at the time of acquisition)
properties or the equivalent;
-
the Company will not (i) invest more than 20% of its gross
assets in undeveloped land; and (ii) commit more than 15% of its
gross assets to forward-funded projects in respect of such
undeveloped land, such commitment to be determined on the basis of
the net construction funding requirements (and associated advisory
costs) of such projects at the time of commitment up to their
completion, in both cases as measured at the time of
investment;
-
the Company will not invest in completed assets which are not
income generative at, or shortly following, the time of
acquisition; and
-
the Company will not invest in closed-ended investment
companies.
The Directors currently intend, at all times, to conduct the
affairs of the Company so as to enable it to qualify as the
principal company of a REIT for the purposes of Part 12 of the CTA
(and the regulations made thereunder).
In the event of a breach of the investment guidelines and
restrictions set out above, the Investment Manager shall inform the
Directors upon becoming aware of the same and, if the Directors
consider the breach to be material, notification will be made to a
Regulatory Information Service.
No material change will be made to the investment policy without
the approval of shareholders by ordinary resolution.
Business and status of the Company
The Company is registered as a public limited company and is an
investment company within the terms of section 833 of the Companies
Act 2006. The Company is a REIT for the purposes of Part 12 of the
CTA. Notification has been submitted to, and acknowledged by, HMRC
for the Company to enter the UK REIT regime. The Company will be
treated as a REIT so long as it continues to meet the REIT
conditions in relation to any accounting period.
The Company was incorporated on 26 February 2013. Its
shares trade on the Premium Segment of the Main Market of the
LSE.
The Company’s performance, along with the important events that
have occurred during the period under review, the key factors
influencing the financial statements and the principal risks and
uncertainties for the financial period are set out in the
Chairman’s statement above and the disclosures below.
UK STUDENT ACCOMMODATION MARKET
International student numbers, which have been the primary
driver of applicant growth over the past five years, have
remained strong.
Overview
The UK has some of the highest-ranking universities in the
world, with three in the top 10 and seven in the top 50 in
2016/171. The UK higher education sector generates c.£73
billion for the economy and contributes 2.8% of the nation’s
gross domestic product.2
Students have become increasingly globally mobile with,
according to the OECD, over 4.5 million students studying
abroad in 2014, more than double the 2.1 million internationally
mobile students in 2000. This figure is forecast to reach 8 million
by 2025. China, India, the Republic of Korea, Germany and Saudi
Arabia are the top five countries with students going
abroad, with almost one in six international students being
Chinese, and Asian students accounting for 53% of all students
studying abroad.
The world’s population is increasingly becoming more educated.
In many of the world’s largest established economies nearly half of
the population of 25 to 34-year olds has tertiary education.
The student body has also changed over the period, becoming
younger and with a higher proportion of full-time students, as the
decline in the number of part-time and mature students has
continued since 2010. Full-time students now make up 74% of the
student body, up from 62% at the start of the decade, and under-25s
now make up three-quarters of all undergraduates and a third of
postgraduates3.
As well as changes in the age of students and their mode of
study, the student body has become more cosmopolitan over the
decade. In 2004/05, 4% of students came from the EU and 9% from
outside the EU. By 2014/15, the numbers had increased to 5% and 14%
respectively4. The US is the most popular market for
international students, with the UK in second place, though
significantly stronger on a per capita basis. One of the UK’s
advantages is its average cost of living and tuition, which is
generally lower than in both the US and Australia5.
-
Times Higher Education World University Rankings 2016/17.
-
The Impact of Universities on the UK Economy, Universities
UK.
-
OECD Education at a Glance 2014. A1-3.
-
HESA student record.
-
OECD Education at a Glance 2014. A13.
HEI acceptance rates
Acceptance rates for the 2016/17 academic cycle broke last
year’s record, with the intake of undergraduates entering UK higher
education totalling c.535,000. Nevertheless, there were another
c.180,000 students who applied for a place who did not get
accepted, which shows a significant surplus demand in the
sector.
On 13 July 2017, UCAS published
application statistics for the June
2017 deadline, which showed that applicants for the UK and
EU were down by 4% and 5% respectively, while non-EU international
students were up 2% on last year. The reduction in UK student
numbers has been primarily driven by a reduction in nursing
degrees, owing to significant funding cuts, with the remainder
coming from mature undergraduates who are more likely to be taking
up apprenticeships under the new government schemes. EU student
numbers were forecast to decrease following two record years of
growth and the impact of the Brexit vote. However, this shortfall
is not expected to have a material impact owing to the scale of
student demand buffer outlined above.
International student numbers, which have been the primary
driver of applicant growth over the past five years, have remained
strong. We expect these numbers should continue to rise over the
medium term, with the sector benefitting from sterling’s
depreciation and the impact of US protectionist trade and visa
policies. The UK remains the second most popular global destination
for those seeking higher education and the government has confirmed
through the Brexit white paper that there is no limit to the number
of genuine international students who can come to the UK to
study.
Student accommodation – supply/demand
imbalance
There is a fundamental supply/demand imbalance in the UK student
accommodation sector which is responsible for the stability and the
robust rental and capital returns produced in this financial
year.
The UK has seen rising student numbers since the early 1990s,
with the student population more than doubling over this period.
Domestic student applications have increased despite an ageing
population and international student numbers continue to grow at a
disproportionate rate, as evidenced by the increase in
international student application rates for the 2016/17
academic year.
There is a structural shortfall of purpose-built student
accommodation in most of the UK. The supply of private student
accommodation has failed to keep pace with the increasing demand
owing to the following:
-
the residential property market has recovered over the past few
years, increasing land values as well as increasing the pressure on
the private residential sector to house tenants other than students
who are willing to pay higher rent levels;
-
the private rented sector has become subject to greater local
authority and government legislation for houses in multiple
occupancy; and
-
universities are not developing new accommodation as they are
becoming more focused on their core competency of investing in
education.
The London market
London has more world-class
universities than any other city in the world. International
students are attracted to London
for a number of reasons including the reputation of London’s
universities, the quality of education and London’s status as a
social and cultural centre.
The Company is primarily focused on the London student accommodation market because
this is where the supply/demand imbalance is at its greatest.
London has a number of important
demand dynamics that separate it from the wider UK student housing
market:
-
Nearly one in three students in London are international;
-
London has the largest number
of international students of any city in the world with c.107,000
students in 2015/16;
-
London is home to some of the
leading HEIs in the world which attract a significant number of
international students;
-
London and the South East have
over 30% of the entire student population of the UK.
On the supply side, the main constraints are
as follows:
-
availability of well-located sites is at its lowest and land
prices have experienced significant inflation driven by residential
development;
-
the introduction of the community infrastructure levy in some
boroughs has eliminated the commercial viability of many student
schemes; and
-
There are only c.90,000 purpose-built student accommodation beds
in London, indicating a
substantial undersupply.
Student accommodation – the importance
of design and quality
Purpose-built student accommodation has evolved as a product
over the past 15 years. Over this period, and in particular,
following the introduction of tuition fees, students have become
consumers in their own right and are making their investment
decisions for their higher education not just on course alone, but
also on a mix of quality of the academia and the quality and
location of accommodation.
Increasingly, students are demanding high-quality living space
with clever design, quality materials, TV areas, communal kitchens
and social areas in the buildings which provide opportunities for
social groups to form and bond, centred around work and play
spaces. Likewise, they are demanding services that create wider
social engagement such as talks, events, workshops and tie-ins with
local businesses and educational establishments.
The leading players in the market are now providing facilities
which mix academia, co-working and social spaces, providing a true
campus environment.
REVIEW OF THE FINANCIAL YEAR
The Company achieved average rental growth of 3.9% across the
portfolio for the 2016/17 academic year, producing a
robust set of results.
Financial results
The Company achieved average rental growth of 3.9% across the
portfolio for the 2016/17 academic year, producing a robust set of
results, with rental income for the year ended 30 June 2017 of
£28.6 million generated from the Company’s property portfolio.
Total gains on investment properties through revaluation of the
Company’s investment portfolio were £11.9 million as at
30 June 2017, positively impacting
operating profit and generating EPS of 8.1 pence. The adjusted
EPS for the period was 4.69 pence
(excluding fair value gains on investment properties and
adjusting for exceptional items and licence fee income).
Total administration expenses of £6.1 million comprise fund
running costs, including the Investment Manager’s fee, Asset and
Facilities Managers’ fees and other service provider costs in the
period.
Ongoing finance charges of £4.9 million in the year comprise
loan interest associated with the Company’s financing
arrangements.
The Company generated total profit before tax for the period of
£23.5 million.
Dividends
In order to maintain REIT status, the Company is required to
meet a minimum distribution test for each accounting period for
which it is a REIT. This test requires the Company to distribute at
least 90% of the income profits of the property rental business for
each accounting period, as adjusted for tax purposes. In respect of
the financial year ended 30 June
2017, the Company paid dividends of 5.75 pence per ordinary share.
The dividends were paid 4.92 pence
per ordinary share as a REIT PID in respect of the Group’s tax
exempt property rental business and 0.83
pence per ordinary share as an ordinary UK dividend. The
Company fulfilled all of its obligations under the UK REIT regime
and was in full compliance with the REIT requirements at
30 June 2017 and at the date of this report.
Dividend cover
Whilst the Company targets a fully covered dividend over the
longer term, during periods of investment where there is a
continuing programme of acquisitions, this may not be achieved.
Dividends of £16.2 million (5.75
pence per ordinary share) were paid during the year. The
dividends were 80% covered by adjusted EPS of 4.69 pence, which is adjusted for exceptional
items principally those arising in connection with the Migration,
rental guarantees and licence fee income.
Capital raises
The Company completed two oversubscribed equity capital raises
during the period, raising gross proceeds of £23 million in
December 2016 and £80.6 million in
February 2017. The issue prices were
140 pence in each case and were
issued at a 4.3% and 2.1% discount to share price and a 3% and 2.4%
premium to NAV (ex-income) respectively. The issues were NAV
accretive for existing shareholders.
Cash flow generation
The Company held cash and cash equivalents of £55.1 million at
the end of the financial year. A total of £14.2 million of
operating cash flows were generated in relation to the Company’s
student accommodation portfolio. Total equity capital raised in the
year amounted to £103.6 million, which was used in part to fund the
construction of Scape Wembley and to acquire Woburn Place. The
remaining cash outflows relate to the cost of servicing the
Company’s debt facility in addition to payment of dividends,
resulting in a net decrease in cash and cash equivalents at the
year end.
Financial performance
Income statement
|
For
the
year ended
30 June 2017
£’000 |
For the
year ended
30 June 2017
£’000 |
Rental income |
28,611 |
22,482 |
Property operating expenses |
(6,086) |
(4,600) |
Gross profit (net operating income) |
22,525 |
17,882 |
Net operating margin |
79% |
79% |
Administration expenses |
(6,072) |
(5,712) |
Fair value gains on investment properties |
11,855 |
27,156 |
Operating profit |
28,308 |
39,326 |
Finance income |
70 |
75 |
Finance costs – ongoing |
(4,864) |
(3,441) |
Finance costs – other |
- |
(7,635) |
Profit before tax for the year |
23,514 |
28,325 |
Debt financing
During the period, the Company entered into an agreement with
its lender, PGIM, to increase the Company’s £130 million secured
debt facility by a further £40 million. The increased £170 million
facility is repayable on 30 September
2024 and the cost of debt on this loan has been reduced from
3.07% to 3.01%. The Company further entered into a new £65 million
facility with PGIM, of which £50 million has been drawn at a
fixed cost of debt of 2.82%. The facility is repayable in
2029 and is secured against certain of the Company’s
assets.
Accordingly, the Company’s banking facilities total £235
million, of which £220 million was drawn at 30 June 2017 at a blended cost of borrowing of
2.96% and with an average weighted maturity of c.8 years. The
loan-to-value of the Group at that date is approximately 32%.
Asset performance
The Company experienced 3.9% year-on-year rental growth for the
2016/17 academic year and marginal yield compression. The valuation
of the Company’s property portfolio has increased by £74.5 million
or 14.9% since the Company’s IPO or its acquisition of assets. The
portfolio was fully occupied for the 2016/17 academic year.
Net assets
Net assets attributable to equity holders at 30 June 2017 were £467 million, up from £358.5
million at 30 June 2016. The increase
in net assets since the prior year end is primarily driven by the
acquisition of two further properties.
At 30 June 2017, there were
335,768,782 ordinary shares in issue, giving an EPRA NAV
(cum-income) per ordinary share of 139.08
pence.
NAV and share price performance
The Company’s ordinary shares have traded at an average premium
of 6.1% since IPO, with an average premium over the financial year
of 7.2%. The Company’s share price hit an all-time high of
152.75 pence per ordinary share on
7 April 2017. Its ordinary shares
have persistently traded at a premium to their NAV since IPO in
2013.
EPRA NAV (cum income) has increased from 136.93 pence as at 30 June
2016 to 139.08 pence per
ordinary share as at 30 June 2017, a
1.6% increase year-on-year. Dividends of 5.75 pence per ordinary share were paid to
shareholders. At the Group level, the annualised total return since
IPO was 14.2%, which exceeds the annualised target return of
8-10%.
Financial performance
Net assets
|
As
at
30 June 2017
£’000 |
As at
30 June 2016
£’000 |
Assets |
|
|
Investment property |
634,640 |
424,787 |
Receivables |
7,825 |
7,682 |
Cash and cash equivalents |
55,110 |
66,337 |
Total assets |
697,575 |
498,806 |
Liabilities |
|
|
Payables |
(5,148) |
(6,929) |
Deferred income |
(7,964) |
(5,235) |
Senior loan |
(217,469) |
(128,174) |
Total liabilities |
(230,581) |
(140,338) |
Net assets |
466,994 |
358,468 |
Number of shares |
335,768,782 |
261,795,015 |
EPRA NAV per share (cum-income) |
139.08p |
136.93p |
EPRA NAV per share
(ex-income) |
137.62p |
135.50p |
COMPANY PERFORMANCE
The Company continues to deliver strong performance.
|
2017 |
2016 |
Annualised shareholder return since
IPO |
14.2% |
13.9% |
|
|
|
Basic earnings per ordinary
share |
8.1p |
15.5p |
|
|
|
Dividends per ordinary share for the
year |
5.75p |
5.66p |
|
|
|
EPRA NAV per ordinary share |
139.08p |
136.93p |
|
|
|
Loan-to-value |
32% |
27% |
|
|
|
Rental growth |
3.9% |
4.5% |
|
|
|
PROPERTY PORTFOLIO
The Company’s property portfolio consists of high-quality,
modern student accommodation focusing on international students,
postgraduates and domestic students alike.
Quality, design and brand
The living experience forms a mainstay of each student’s
university life and the Company has put the quality, design,
experience and performance of its assets at the heart of its
operational strategy. This is achieved through the Company’s
investment selection and its choice of Asset and Facilities
Managers.
Scape is the Asset and Facilities Manager for all of the
Company’s ‘Scape’ branded assets and with effect from 1 September 2016, The Pad (previously managed by
CRM). The vision of the Scape brand was to create a new kind of
student accommodation; one that was affordable but with modern
design. By enlisting the help of leading interior designers and top
architects, Scape continues to ensure that high standards of
quality finishes and service are met. Years of hard work and
listening to student feedback has resulted in some of the best
student accommodation in and around London.
Alongside the striking design features, the properties also
offer ample common space for students to socialise and study.
High-speed internet and wi-fi are available throughout each
location. Scape responds proactively to student feedback, which has
resulted in the provision of extra facilities and amenities, such
as additional private rooms for group study, recreational areas and
a gym.
Collegiate is the Asset and Facilities Manager for Water Lane
Apartments. Collegiate’s management philosophy is based on
enhancing the university experience for their residents. It
specialises in managing high-specification, design led schemes with
a focus on superior service quality. Collegiate’s team has
experience in managing a range of diverse student accommodation
assets, in over 25 cities, and across over 40 student
blocks, serving some 30,000 student tenants.
At 30 June 2017, the Company’s
portfolio comprised high-quality, modern student accommodation
buildings, of which 97% of the value was located in and around
London.
Current
Asset |
Number of
beds |
Valuation at 30 June
2017 |
Net Initial
Yield |
Scape East |
588 |
£129.8m |
5.05% |
Scape Wembley |
578 |
£59.1m1 |
N/A |
Scape Shoreditch |
541 |
£177.7m |
4.75% |
Woburn Place |
4552 |
£138.7m |
4.76% |
Scape Greenwich |
280 |
£51.8m |
5.03% |
The Pad |
220 |
£34.9m |
5.75% |
Water Lane Apartments |
153 |
£18.8m |
5.75% |
Scape Surrey |
141 |
£23.8m |
5.65% |
Total/blended yield |
2,956 |
£634.6m |
5.00% |
Post year end
Asset |
Number of
beds |
Valuation at 30
June 2017 |
Net Initial
Yield |
Circus Street |
450 |
N/A3 |
N/A |
Total/blended yield |
450 |
N/A |
N/A |
-
At 30 June 2017, the property was
under construction.
-
Number of beds at acquisition prior to refurbishment.
-
Acquired post year end and currently under construction.
OPERATIONAL ASSET
Scape Wembley
Number of beds: 578
Fulton Road, London HA9 0TF
Scape Wembley is a private student residence located in Wembley,
London. It was forward funded by
the Company and completed in August
2017 under the Scape brand.
The property is located adjacent to Wembley Stadium and within
short walking distance from Wembley Park Station. Scape Wembley
comprises high-specification, purpose-built private student
accommodation with c.580 modern studios and beds with communal
areas. The majority of London’s universities are accessible within
30 minutes. The site is located within 14 minutes travel time to
Marylebone, 20 minutes to Bond Street and 25 minutes to
King’s Cross.
For the forthcoming 2017/18 academic year, Scape Wembley is
occupied by students from 45 HEIs and of 74 different
nationalities, with c.70% of tenants coming from outside the
UK.
OPERATIONAL ASSET
Scape Shoreditch
Number of beds: 541
45 Brunswick Place, London N1
6DX
Scape Shoreditch is located in a prime London location in Shoreditch. The property
was acquired by the Company in September
2015.
The property is within a 15-minute walk of The City University
(c.18,000 students) and CASS Business School.
The building comprises 541 studio bedrooms and c.10,000 sq ft of
communal areas including a gym, dance studio, study lounge, games
room, cinema, communal kitchen, sun terrace and barbecue terrace.
The building also includes c.49,000 sq ft of commercial facilities
let to WeWork on a 15-year fully repairing and insuring lease. The
lease generates approximately 25% of total revenues for Scape
Shoreditch after expiry of the tenant’s incentives.
At 30 June 2016, Scape Shoreditch
was occupied by students from 45 HEIs and of 59 different
nationalities, with c.94% of tenants coming from outside the
UK.
OPERATIONAL ASSET
Scape East
Number of beds: 588
450 Mile End Road, London E1
4GG
Scape East is a private student residence located in
Mile End, London. It was completed in June 2012 under the Scape brand.
Scape East is located directly opposite QMUL, which is a Russell
Group HEI and one of London’s leading universities with c.17,000
students. Approximately 87% of all Scape East’s direct let students
study at QMUL. The impressive building encompasses a double height
entrance and floor-to-ceiling glazed reception. Residents have
access to a private courtyard garden, free gym, TV and games
lounge, communal kitchen, study areas and an on-site
restaurant.
Additional rental income is generated through a 30-year FRI
lease with annual RPI uplifts of teaching facilities. This has
generated 6.5% of total revenues for Scape East for the 2016/17
academic year.
As at 30 June 2016, Scape East was
occupied by students from 25 different HEIs and of 67 different
nationalities, with c.89% of tenants coming from outside the
UK.
DEVELOPMENT ASSET
Woburn Place
This property is under refurbishment
Number of beds: 455¹
In April 2017, the Company
acquired Woburn Place, a private student accommodation asset
located at a prime central London
position in Bloomsbury, WC1.
Woburn Place, which for the 2016/17 academic year was operated
by Unite Students, is within short walking distance of University
College London (c.38,000 students from 150 countries), SOAS
University of London
(c.5,000 students from 133 countries) and two teaching
hospitals, University College Hospital and Great Ormond Street
Hospital. The London School of
Economics, Kings College London,
City University and University of the
Arts, London are also
within walking distance, bringing the total number of students in
close proximity to Woburn Place to c.100,000.
From mid-September 2017, the Group
will reconfigure and refurbish the property to the high
specification typical of the Group’s existing standing assets
and the Scape Student Living brand. The refurbishment will
involve diversifying the mix of accommodation units, offering
modern studios and single and double occupancy apartment-style
accommodation, which is expected to optimise rental growth and
occupancy levels.
It is currently envisaged that the refurbishment will be
substantially completed ahead of the 2018/19 academic year,
following which it is currently expected that the property will
provide c.420 modern beds as well as communal areas.
¹ Number of beds at acquisition prior to refurbishment.
POST YEAR END DEVELOPMENT ASSET
Circus Street, Brighton
This development is under construction
Number of beds: 450
In July 2017, the Company entered
into an exclusivity arrangement in respect of the
acquisition of its second forward-funded development.
Circus Street, is located in a city centre location in
Brighton within short walking
distance of its iconic pier, vibrant shopping district and
transport links. The property will primarily serve the University
of Sussex, a UK top 20 university,
and Brighton University with in
aggregate c.36,000 students including c.6,100 international
students. Brighton benefits from a
strong structural shortfall of private student accommodation and
considerable supply constraints.
The expectation is that construction of Circus Street will be
completed ahead of the 2019/2020 academic year following which
it will offer high specification student accommodation and
c.30,000 square feet of commercial office space. The
student accommodation will provide c.450 modern beds. It is
currently expected the student accommodation will be contracted to
a subsidiary owned and guaranteed by an established global
HEI on a 21 year lease, with upward only annual uplifts.
It is currently envisaged that the additional commercial space will
generate ancillary revenues through medium to long-term leases.
The acquisition of Circus Street through a forward-funded
arrangement has enabled the Group to secure an asset at an
attractive valuation relative to acquiring assets which are already
operational. Further, such arrangements enable the Group to provide
modern, purpose-built accommodation where suitable existing assets
are scarce.
CORPORATE, SOCIAL AND ENVIRONMENTAL
RESPONSIBILITY
The Company’s aim is to operate a fully sustainable business
model with a low carbon footprint.
The Company is committed to being both socially and
environmentally responsible and recognises the impact it has on the
environment.
Environmental impact
The Company is committed to being both socially and
environmentally responsible and recognises the impact it has on the
environment. The Company has delegated the day-to-day asset and
facilities management to the Asset and Facilities Managers, who are
responsible for the provision of energy supplies, including the
procurement of renewable energy, managing the Company’s waste
schemes and raising general awareness of environmental impact and
waste reduction amongst the Group’s employees and residents.
Sustainability
The Company’s environmental sustainability measures include the
use of highly-efficient combined heat and power systems, ground
source heat pumps and intelligent interior heating and lighting to
minimise GHG emissions. The Company’s property portfolio
incorporates green roof space, rainwater harvesting and sustainable
waste management, including diverting waste from landfill to
generate renewable electricity via the waste management process.
In the year to 30 June 2017, Scape procured the
conversion c.83% of property waste into renewable energy
and 17% into national recycling schemes.
Greenhouse gas emissions
This section contains information on GHG emissions required by
the Companies Act 2006 (Strategic Report and Directors’ Report)
Regulations 2013 (the “Regulations”).
Reporting period
The reporting period is 1 July
2016 to 30 June 2017, comprising the financial
year of the Company.
Methodology
The principal methodology used to calculate the emissions
reflects the UK Government’s Environmental Reporting Guidance (2013
version).
The Company has reported on all of the emission sources required
under the Regulations. The Company does not have responsibility for
any emission sources that are not included in the carbon emissions
data table below.
Organisational boundary
An operational control approach was used to define the Company’s
organisational boundary and responsibility for GHG emissions. The
Company owns 100% of the property assets it operates and has
therefore reported on that basis. All material emission sources
within this boundary have been reported upon, in line with the
requirements of the Regulations.
Intensity ratio
In order to express the GHG emissions in relation to a
quantifiable factor associated with the Company’s activities, the
intensity ratio per square foot has been chosen. It is considered
that this intensity ratio will provide a uniform basis of comparing
data between the Company’s different properties and take into
account the commercial areas within each of the properties. This
will also allow comparison of the Company’s performance over time,
as well as with other companies in the Company’s peer group.
Total GHG emissions data for the year
ended 30 June 2017:
Carbon emissions data |
2017 |
2016
(rebased)1 |
2016 |
Absolute energy use: |
|
|
|
Residential gas (kWh) |
4,121,815 |
5,928,932 |
3,939,897 |
Residential oil (kWh) |
— |
— |
— |
Residential electricity (kWh) |
6,526,010 |
4,365,836 |
3,089,383 |
Absolute CO2e
emissions (tonnes CO2e) |
2,899 |
2,890 |
1,998 |
Residential gas emissions (tonnes
CO2e) (Scope 1) |
1,201 |
1,664 |
725 |
Residential oil emissions (tonnes
CO2e) (Scope 1) |
— |
— |
— |
Residential electricity emissions
(tonnes CO2e) (Scope 2) |
1,698 |
1,226 |
1,273 |
Total residential emissions
(tonnes CO2e) (Scopes 1+2) |
2,899 |
2,890 |
1,998 |
CO2e emissions per sq
ft |
0.0050 |
0.0047 |
0.0034 |
Residential gas and oil emissions
(tonnes CO2e/sq ft) (Scope 1) |
0.0021 |
0.0018 |
0.0012 |
Residential electricity emissions
(tonnes CO2e/sq ft) (Scope 2) |
0.0029 |
0.0029 |
0.0022 |
Total residential emissions (tonnes
CO2e/sq ft) (Scopes 1+2) |
0.0050 |
0.0047 |
0.0034 |
1 The 2016 emissions data has been rebased to reflect
a comparative twelve-month period on a like-for-like basis for the
prior year.
The Company’s emissions have increased year-on-year due to
owning and operating three of the Company’s assets for a full
12-month period.
Diversity and equality
The Company is committed to achieving a working environment
which provides equality of opportunity and freedom from unlawful
discrimination on the grounds of race, sex, pregnancy and
maternity, marital or civil partnership status, gender
reassignment, disability, religion, beliefs, age or sexual
orientation. The Company’s policy aims to remove unfair and
discriminatory practices and to encourage full contribution from
its diverse community. It is committed to actively opposing all
forms of discrimination and values diversity amongst its
workforce.
Further information on the Company’s diversity policy is
included in the corporate governance statement in the full Annual
Report.
Social and community
The Company is committed to being socially responsible and the
Directors consider community involvement to be an important part of
that responsibility. The Company is indirectly involved with a
number of social and local community initiatives via the Asset and
Facilities Managers, such as local employment schemes and
initiatives to give back to the local area through student
bursaries, sponsorship and local events.
Human rights
The Company respects human rights and aims to provide assurance
to internal and external stakeholders that it will carry out its
affairs in accordance with the principles of the Universal
Declaration of Human Rights. No human rights concerns have arisen
within the Company’s operations or its supply chain during the year
ended 30 June 2017.
Employees
Scape has overall responsibility for the supervision and
provision of asset management services through oversight and
management of the employees of GCP Operations Limited, a subsidiary
of the Company, and has responsibility for the procurement and
supervision of the facilities management services on behalf of the
Company in connection with the Company’s ‘Scape’ branded assets,
and with effect from 1 September
2016, The Pad.
Gender breakdown
The gender breakdown of the Group’s Directors, senior management
and employees as at 30 June 2017, is detailed below.
As at 30 June 2017 |
Women |
Men |
Directors |
1 (2016: 1) |
3 (2016: 3) |
Senior management |
3 (2016: 3) |
5 (2016: 3) |
Employees |
39 (2016: 38) |
43 (2016: 30) |
RISK MANAGEMENT
Robust risk assessments and reviews of internal controls are
undertaken regularly in the context of the Company’s
overall investment objective.
The Board is responsible for the systems of internal controls
relating to the Group including the reliability of the financial
reporting process and for reviewing the systems' effectiveness.
Role of the Board
The Directors have overall responsibility for risk management
and internal control within the Group. They recognise that risk is
inherent in the operation of the Group and that effective risk
management is key to the success of the organisation. The Directors
have delegated responsibility for the assurance of the risk
management process and the review of mitigating controls to the
audit committee.
The Directors, when setting the risk management strategy, also
determine the nature and extent of the significant risks and its
risk appetite in implementing this strategy. A formal risk
identification and assessment process has been in place since IPO,
resulting in a risk framework document which summarises the key
risks and their mitigants.
The Directors undertake a formal risk review with the assistance
of the audit committee at least twice a year in order to assess the
effectiveness of the Group’s risk management and internal control
systems. During the course of such review, the Directors have not
identified, nor been advised of any failings or weaknesses which
they have determined to be of a material nature. The principal
risks and uncertainties which the Group faces are set
out below.
Internal control review
The Board is responsible for the systems of internal controls
relating to the Group including the reliability of the financial
reporting process and for reviewing the systems'
effectiveness.
The Directors have reviewed and considered the guidance supplied
by the FRC on risk management, internal control and related finance
and business reporting and an ongoing process has been established
for identifying, evaluating and managing the risks faced by the
Group. This process, together with key procedures established with
a view to providing effective financial control, was in place
during the year under review and at the date of this report.
The internal control systems are designed to ensure that proper
accounting records are maintained, that the financial information
on which business decisions are made and which is issued for
publication, is reliable and that the assets of the Group are
safeguarded.
The risk management process and Group systems of internal
control are designed to manage rather than eliminate the risk of
failure to achieve the Company’s objectives. It should be
recognised that such systems can only provide reasonable, not
absolute, assurance against material misstatement or loss.
The Directors have carried out a review of the effectiveness of
the systems of internal control as they have operated over the
period and up to the date of approval of the report and
financial statements.
There were no matters arising from this review that required
further investigation and no significant failings or weaknesses
were identified.
Internal control assessment
process
Robust risk assessments and reviews of internal controls are
undertaken regularly in the context of the Company’s overall
investment objective. The Board, through the audit committee,
has categorised risk management controls under the following key
headings:
-
execution risk;
-
portfolio risk;
-
financial risk; and
-
regulatory risk.
In arriving at its judgement of what risks the Group faces, the
Board has considered the Group’s operations in the light of the
following factors:
-
the nature and extent of risks which it regards as acceptable
for the Group to bear within its overall business objective;
-
the threat of such risks becoming reality;
-
the Group’s ability to reduce the incidence and impact of risk
on its performance;
-
the cost to the Group and benefits related to the review of risk
and associated controls of the Group; and
-
the extent to which the third parties operate the relevant
controls.
A risk matrix has been produced against which the risks
identified and the controls in place to mitigate those risks can be
monitored. The risks are assessed on the basis of the likelihood of
them happening, the impact on the business if they were to occur
and the effectiveness of the controls in place to mitigate them.
This risk register is reviewed at least every six months by the
audit committee and at other times as necessary.
Most of the day-to-day management functions of the
Group are sub-contracted, and the Directors therefore obtain
regular assurances and information from key third party suppliers
regarding the internal systems and controls operating in their
organisations. In addition, each of the third parties is requested
to provide a copy of its report on internal controls each year,
which is reviewed by the audit committee.
Going concern
In assessing the Group’s ability to continue as a going concern,
the Directors have considered the Company’s investment objective,
risk management policies, capital management (see note 27 to the
financial statements), the quarterly NAV and the nature of its
portfolio and expenditure projections. The Directors believe that
the Group has adequate resources, an appropriate financial
structure and suitable management arrangements in place to continue
in operational existence for the foreseeable future. In addition,
the Board has had regard to the Group’s investment performance, the
price at which the Company’s shares trade relative to the NAV and
ongoing investor interest in the continuation of the Company
(including feedback from meetings and conversations with
shareholders by the Group’s advisers).
Based on their assessment and considerations, the Directors have
concluded that they should continue to prepare the financial
statements of the Company on a going concern basis and the
financial statements have been prepared accordingly.
Viability statement
The Directors have considered each of the Company’s principal
risks and uncertainties detailed below, in particular the risk and
impact of a downturn in the UK commercial property market or the
international student market which could materially affect the
valuation and cash flows of the Company’s investments,
impacting the viability of the Company. The Directors also
considered the Company’s policy for monitoring, managing
and mitigating its exposure to these risks.
The Directors have assessed the prospects of the Company over a
longer period than the twelve months required by the going concern
provision. The Board has determined that a five-year period
constitutes an appropriate period to provide its viability
statement. The Company does not have a fixed life, it assumes
long-term hold periods for the assets in its portfolio and analyses
its financial model over a five-year horizon.
This assessment involved an evaluation of the potential impact
on the Company of these risks occurring. Where appropriate, the
Company’s financial model was subject to a sensitivity analysis
involving flexing a number of key assumptions in the underlying
financial forecasts in order to analyse the effect on the Company’s
net cash flows and other key financial ratios including loan
covenants. This analysis included modelling the impact of severe
but plausible downside scenarios that incorporate the principal
risks as follows:
-
reductions in rental income;
-
reductions in property values;
-
increases in the Company’s operating expenses; and
-
deflationary scenarios that could impact on the Company’s
ability to meet its loan covenants.
The Company’s assets derive revenues considered to be
dependable due to the inherent supply demand imbalances of the
market in which the Company operates. Additionally, the Company’s
low leverage comprises a fixed rate facility which matures beyond
the five-year horizon. Therefore, the Directors have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the five-year period
of their assessment.
Principal risks and uncertainties
The Directors have identified the following principal risks and
uncertainties and the actions taken to manage each of these. If one
or more of these risks materialised, this could potentially have a
significant impact upon the Group’s ability to meet its investment
objective.
RISK 1: EXECUTION RISK |
Reliance on the
Investment Manager and third party service providers
Risk: The Group relies upon the performance of third party service
providers to perform its main functions. In particular, the Group
depends on the Investment Manager to provide investment advice and
management services. Such services, which include monitoring the
performance of the investment portfolio and conducting due
diligence in respect of any new investments, are integral to the
Group’s performance. |
Impact: Failure by a
third party service provider to carry out its obligations in
accordance with the terms of its appointment, or to exercise due
care and skill, could have a material adverse effect on the Group’s
performance. The misconduct or misrepresentations by employees of
the Group, the Investment Manager, the Asset and Facilities
Managers or other third-party service providers could cause
significant losses to the Group. |
How the risk is
managed: The performance of the Group’s service providers is
closely monitored by the management engagement committee of the
Company, which conducts review meetings with each of the Group’s
principal third party service providers on an annual basis. The
audit committee also reviews the internal controls reports and
other compliance and regulatory reports of its service providers on
an annual basis. The performance of the employees within the Group
is monitored by Scape and considered by the board of GCP Operations
Limited which meets twice a year. |
Due
diligence
Risk: Prior to entering into an agreement to acquire any property,
the Investment Manager will perform due diligence, on behalf of the
Group, on the proposed investment. The due diligence process may
not reveal all facts that may be relevant in connection with any
proposed investment. |
Impact: To the extent
that the Investment Manager underestimates or fails to identify
risks and liabilities associated with the investment in question,
the Group may be subject to defects in title, to environmental,
structural or operational defects requiring remediation, or may be
unable to obtain necessary permits which may materially and
adversely impact the NAV and the earnings
of the Company. |
How the risk is
managed: In addition to the due diligence carried out by the
Investment Manager, third party technical, insurance and legal
experts are engaged to advise on specific risks to an acquisition,
whether it be structured via a property-owning vehicle or a direct
property acquisition. |
RISK 2: PORTFOLIO RISK |
UK property market
conditions
Risk: The Group’s performance depends on property values in the UK
to a significant extent. |
Impact: An overall
downturn in the UK property market as a result of Brexit and/or
other factors and the availability of credit to the UK property
sector may have a materially adverse effect upon the value of the
property owned by the Group and ultimately upon the net asset value
and the ability of the Company to generate revenues. |
How the risk is
managed: The Investment Manager continuously monitors market
conditions and provides the Board with quarterly updates on the
student accommodation market and senior debt market to act as an
early warning signal of any adverse market conditions
ahead. |
Concentration
risk
Risk: The Company’s property portfolio comprises eight assets.
Substantially all of the Group’s assets are currently located in
and around London; as a result of this concentration, the Group may
be adversely affected by events including Brexit, which may damage
or diminish London’s attractiveness to students (especially
overseas students) or London property values. |
Impact: Any
circumstances which materially affect the returns generated by the
Group’s property portfolio may materially and adversely impact the
NAV and earnings of the Company. |
How the risk is
managed: The Group is focused on the London market because this is
where the largest supply/demand imbalance exists in the UK student
accommodation market. The Investment Manager and the Asset and
Facilities Managers have significant experience in the sector and
continuously monitor the market and provide quarterly updates to
the Board, to act as an early warning signal of any adverse market
conditions ahead. |
Development
risk
Risk: The Group may invest in development and forward-funded
projects which have received planning permission for student
accommodation. Development activities may involve a higher degree
of risk than is associated with standing assets. |
Impact: Inaccurate
assessment of a development opportunity, delays or disruptions
which are outside of the Group’s control, changes in market
conditions and the inability of developers and/or building
contractors to perform their contractual commitments could have a
material adverse effect on the Company’s profitability and
NAV. |
How the risk is
managed: The Group engages third party professional advisers to
review and opine on development risk prior to commitment. All
contracts entered into are guaranteed maximum price contracts with
a suitable contractor and significant equity buffer. The Company’s
development exposure is limited to 20% of its gross assets in
undeveloped land and 15% of its gross assets to forward-funded
projects in respect of such undeveloped land. |
Net income and
capital values
Risk: Occupancy, rental income and property values may be adversely
affected by a number of factors, including a fall in the number of
students, competing sites, any harm to the reputation of the Group
or the Scape brand amongst universities, students or other
potential customers or as result of other local or national
factors, including Brexit. The failure to collect rents, periodic
renovation costs and increased operating costs may also adversely
affect the Group. |
Impact: A decrease in
rental income, occupancy and/or property values may materially and
adversely impact the NAV and earnings of the Company as well as the
ability to service interest on its debt facility in the longer
term. |
How the risk is
managed: The Investment Manager will only propose to the Board
those assets which it believes are in the most advantageous
locations and benefit from large supply and demand imbalances that
can withstand the entry of new competitors into the market. In
addition, the quality of assets that the Group acquires will be
amongst the best in class to minimise occupancy risk. The
Investment Manager monitors the performance of the Asset and
Facilities Managers and provides the Board with performance reports
on a quarterly basis, including any operational or
performance-related issues which could potentially have an impact
on brand confidence or integrity. |
Property valuation
and liquidity
Risk: The valuation of the Group’s property portfolio is inherently
subjective, in part because all property valuations are made on the
basis of assumptions which may not prove to be accurate, and
because of the individual nature of each property and limited
transactional activity. |
Impact: Valuations of
the Group’s investments may not reflect actual sale prices, even
where any such sales occur shortly after the relevant valuation
date. Property investments are typically illiquid and may be
difficult for the Company to sell and the price achieved on any
such realisation may be at a discount to the prevailing valuation
of the relevant investments. |
How the risk is
managed: The Company has entered into a valuation agreement with
Knight Frank LLP to provide quarterly valuations of all of the
Group’s assets. Knight Frank LLP is one of the largest valuers of
student accommodation in the UK and therefore has access to the
maximum number of data points to support its valuations. In
addition to this, the Board of Directors has significant experience
of property valuation and its constituent elements. Whilst the
Company invests funds with the aim of both capital appreciation and
investment income, it has no immediate plans to sell or realise the
capital appreciation (and so generate returns) from any increase in
the value of its investment properties, except by way of increased
rental income. |
RISK 3: FINANCIAL RISK |
Breach of financial
covenants
Risk: The availability of Company’s debt facility depends on the
Company complying with a number of key financial covenants in
respect of loan-to-value and interest service cover. |
Impact: An adverse
change to capital values as a result of a downturn in the UK
property market or a reduction to net income due to factors such as
a fall in the number of students or other national factors may lead
to a situation whereby the Group breaches its banking
covenants. |
How the risk is
managed: The Company’s borrowing policy provides for the Company to
have no more than 55% gearing in the short term and 30% in the long
term. In addition to this, the Investment Manager provides the
Board with a quarterly update on the state of the UK property
market and the senior debt market and act as an early warning
signal. At 30 June 2017, the Company had significant headroom
against its banking covenants. |
RISK 4: REGULATORY RISK |
Compliance with laws
and regulations
Risk: Any change in the laws, regulations and/or government policy
affecting the Group, including any change in the Company’s tax
status or in taxation legislation in the UK (including a change in
interpretation of such legislation) may have a material adverse
effect on the ability of the Company to successfully pursue its
investment policy and meet its investment objective or provide
favourable returns to shareholders. |
Impact: An increase in
the rates of stamp duty land tax could have a material impact on
the value of assets acquired. In addition, if the Group fails to
remain a REIT for UK tax purposes, its profits and property
valuation gains will be subject to UK corporation tax. |
How the risk is
managed: The Board has appointed Gowling WLG (UK) LLP as legal
counsel, Capita Company Secretarial Services Limited as Company
Secretary and Deloitte LLP as tax adviser to ensure compliance with
all relevant laws and regulations. The Board has ultimate
responsibility for ensuring adherence to the UK REIT regime and
monitors the compliance reports provided by the Investment
Manager and other third party service providers. |
Government policy
and Brexit
Risk: Changes in government policy which adversely impact the
number of students in the UK may have a material adverse impact on
the Company’s ability to meet its stated objectives. Further, the
Group may be subject to a period of significant uncertainty in the
event of the UK leaving the EU. |
Impact: Material
reductions to the number of students, including international
students, attending HEIs in the UK and/or material adverse impact
on the value of student accommodation assets in the UK. |
How the risk is managed: The
Board has significant experience in the sector and, together with
its relevant advisers, closely monitors changes in government
policy in respect of UK, EU and international students. |
The strategic report has been approved by the Board and signed
on its behalf.
Robert Peto
Chairman
14 September 2017
BOARD OF DIRECTORS
Robert Peto - Chairman
Marlene Wood - Chair of the audit
committee
Peter Dunscombe - Senior Independent
Director and Chair of the remuneration committee
Malcolm Naish - Chair of the
management engagement committee
All Directors are non-executive and independent of the
Investment Manager.
EXTRACTS FROM THE DIRECTORS’
REPORT
Share capital
At a general meeting held on 27 April
2016, the Company was granted the authority to allot and to
disapply pre-emption rights in respect of a placing programme of up
to 65 million ordinary shares (the “2016 Placing Programme”). As
reported in the 2016 annual report, following the publication of a
prospectus in respect of the 2016 Placing Programme on 29 April 2016, the Company announced on
20 May 2016 that it had accepted
applications in respect of a placing of 44,085,232 ordinary shares
at a price of 136.10 pence per share, with an aggregate
nominal value of £440,852.32 raising gross proceeds of
£60 million for the Company (the “May 2016 Placing”). These
shares were issued under the placing to institutional investors and
professionally-advised private investors and admitted to trading on
the SFS on 24 May 2016, prior to the
Migration.
As part of its 2016 Placing Programme, the Company further
announced on 16 December 2016 that it
had accepted applications in respect of a placing of 16,428,572
ordinary shares at a price of 140
pence per share, with an aggregate nominal value of
£164,285.72, raising gross proceeds of £23 million for the Company
(the “December 2016 Placing”). These shares were issued under the
placing to institutional investors and professionally advised
private investors and admitted to trading on the premium segment of
the LSE’s main market on 20 December
2016 following the Migration. In all, 60,513,804 ordinary
shares were issued and allotted by the Company prior to the closure
of the 2016 Placing Programme, with an aggregate nominal value of
£605,138.04, raising gross proceeds of £83 million for the
Company.
At a general meeting held on 31 January
2017, the Company was granted the authority to allot and to
disapply pre-emption rights in respect of a placing programme of up
to 200 million ordinary shares (the “2017 Placing Programme”).
Following the publication of a prospectus in respect of the 2017
Placing Programme on 2 February 2017,
the Company announced on 22 February
2017 that it had accepted applications in respect of
57,545,195 ordinary shares at a price of 140
pence per share, with an aggregate nominal value of
£575,451.95, raising gross proceeds of £80.6 million for the
Company (the “Initial Issue”). These shares were issued under the
placing to institutional investors and professionally-advised
private investors and admitted to the premium segment of the LSE’s
main market on 24 February 2017.
In pursuance of its 2017 Placing Programme, the Company
announced on 5 July 2017 that it had
accepted applications in respect of a placing of 49,295,774
ordinary shares at a price of 142 pence per share, with an
aggregate nominal value of £492,957.74, raising gross proceeds of
£70 million for the Company (the “July 2017 Placing”). These
shares were issued under the placing to institutional investors and
professionally advised private investors and admitted to trading on
the premium segment of LSE’s main market on 7 July 2017.
Following the July 2017 Placing, and
as at the date of this report, the Company may allot up to a
further 93,159,031 ordinary shares under the 2017 Placing
Programme, which will expire on 1 February 2018.
At the annual general meeting held on 27 October 2016,
the Company was granted authority to purchase up to 14.99% of the
Company’s ordinary share capital in issue at that date, amounting
to 39,243,072 ordinary shares. No ordinary shares have been bought
back under this authority. This authority will expire at the
conclusion of, and renewal will be sought at, the annual general
meeting to be held on 25 October
2017. Shares bought back by the Company may be held in
treasury, from where they could be re-issued at or above the
prevailing NAV quickly and cost effectively. This provides the
Company with additional flexibility in the management of its
capital base. No shares were held in treasury during the year or at
the year end.
At the year end, the issued share capital of the Company
comprised 335,768,782 ordinary shares. At the date of this report,
the Company’s issued share capital comprised 385,064,556 ordinary
shares.
At general meetings of the Company, ordinary shareholders are
entitled to one vote on a show of hands and on a poll, to one vote
for every ordinary share held. At 30 June
2017, the total voting rights of the Company were
335,768,782 and as at the date of this report, are 385,064,556.
Dividends
Dividends totalling 5.75 pence per
ordinary share have been paid in respect of the year ended
30 June 2017 as follows:
|
Year ended
30 June 2017
pence |
Year ended
30 June 2016
pence |
First interim dividend |
1.43 |
1.41 |
Second interim dividend |
1.43 |
1.41 |
Third interim dividend |
1.43 |
1.41 |
Fourth interim dividend |
1.46 |
1.43 |
Total |
5.75 |
5.66 |
No final dividend is being proposed.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
In the respect of the annual report and financial
statements
The Directors are responsible for preparing the annual report
and financial statements in accordance with applicable UK law and
IFRS as adopted by the EU.
Under company law, the Directors must not approve the financial
statements unless they are satisfied that they present fairly the
financial position, financial performance and cash flows of the
Group for that year.
In preparing the financial statements, the Directors are
required to:
-
select suitable accounting policies in accordance with IAS 8:
“Accounting Policies, Changes in Accounting Estimates and Errors”
and then apply them consistently;
-
present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information;
-
provide additional disclosures when compliance with specific
requirements in IFRS is insufficient to enable users to understand
the impact of particular transactions, other events and conditions
on the Group’s financial position and financial performance;
-
state that the Group has complied with IFRS, subject to any
material departures disclosed and explained in the financial
statements; and
-
make judgements and estimates that are reasonable and
prudent.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and enable them to ensure that the
financial statements comply with the Companies Act 2006 and Article
4 of the IAS Regulation. They are also responsible for safeguarding
the assets of the Group and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a strategic report, Directors’ report,
Directors’ remuneration report and corporate governance statement
that comply with that law and those regulations, and for ensuring
that the annual report includes information required by the
Disclosure Guidance and Transparency Rules of the UKLA.
The financial statements are published on the Company’s website,
which is maintained on behalf of the Company by the Investment
Manager. The work carried out by the Auditor does not involve
consideration of the maintenance and integrity of this website and
accordingly, the Auditor accepts no responsibility for any changes
that have occurred to the financial statements since they were
initially presented on the website. Under the investment management
agreement, the Investment Manager is responsible for the
maintenance and integrity of the corporate and financial
information included on the Company’s website. Visitors to the
website need to be aware that legislation in the UK covering the
preparation and dissemination of the financial statements may
differ from legislation in their jurisdiction.
We confirm that to the best of our knowledge:
-
the financial statements, prepared in accordance with IFRS as
adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and profit of the Company (and
Group as a whole); and
-
this annual report includes a fair review of the development and
performance of the business and the position of the Company (and
Group as a whole), together with a description of the principal
risks and uncertainties that it faces.
The Directors consider that the annual report and financial
statements, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to
assess the Company’s performance, business model and
strategy.
On behalf of the Board
Robert Peto
Chairman
14 September 2017
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the
Company's statutory accounts for the year ended 30 June 2017 or the year ended 30 June 2016 but is derived from those accounts.
Statutory accounts for the year ended 30
June 2016 have been delivered to the Registrar of Companies
and those for 2017 will be delivered in due course. The Auditor has
reported on those accounts; their report was (i) unqualified, (ii)
did not include a reference to any matters to which the Auditor
drew attention by way of emphasis without qualifying their report
and (iii) did not contain a statement under Section 498 (2) or (3)
of the Companies Act 2006. The text of the Auditor's report can be
found in the Company's full annual report and financial statements
at www.graviscapital.com/funds/gcp-student.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2017
Continuing operations |
Notes |
30 June 2017
£’000 |
30 June 2016
£’000 |
Rental income |
4 |
28,611 |
22,482 |
Property operating expenses |
5 |
(6,086) |
(4,600) |
Gross profit |
|
22,525 |
17,882 |
Administration expenses |
5 |
(6,072) |
(5,712) |
Operating profit before gains on investment
properties |
|
16,453 |
12,170 |
Fair value gains on investment properties |
3 |
11,855 |
27,156 |
Operating profit |
|
28,308 |
39,326 |
Finance income |
9 |
70 |
75 |
Finance expenses – ongoing |
10 |
(4,864) |
(3,441) |
Finance expenses – exceptional |
10 |
— |
(7,635) |
Profit before tax |
|
23,514 |
28,325 |
Tax (charge)/credit on residual income |
11 |
(40) |
3 |
Profit for the year |
|
23,474 |
28,328 |
Other comprehensive income to be reclassified
to profit and loss in subsequent years |
|
|
|
Net gains on cash flow hedges |
20 |
— |
214 |
Total comprehensive income for the
year |
|
23,474 |
28,542 |
EPS (basic and diluted) (pps) |
14 |
8.08 |
15.48 |
The accompanying notes below form an integral part of these
financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2017
|
Notes |
30 June
2017
£’000 |
30 June 2016
£’000 |
Assets |
|
|
|
Non-current assets |
|
|
|
Investment property |
3 |
634,640 |
424,787 |
Retention account |
|
308 |
815 |
|
|
634,948 |
425,602 |
Current assets |
|
|
|
Cash and cash equivalents |
16 |
55,110 |
66,337 |
Trade and other receivables |
17 |
7,517 |
6,867 |
|
|
62,627 |
73,204 |
Total assets |
|
697,575 |
498,806 |
Liabilities |
|
|
|
Non-current liabilities |
|
|
|
Interest bearing loans and borrowings |
19 |
(217,469) |
(128,174) |
Retention account |
|
(308) |
(815) |
|
|
(217,777) |
(128,989) |
Current liabilities |
|
|
|
Trade and other payables |
18 |
(4,840) |
(6,114) |
Deferred income |
18 |
(7,964) |
(5,235) |
|
|
(12,804) |
(11,349) |
Total liabilities |
|
(230,581) |
(140,338) |
Net assets |
|
466,994 |
358,468 |
Equity |
|
|
|
Share capital |
21 |
3,358 |
2,618 |
Share premium |
22 |
340,233 |
239,653 |
Special reserve |
23 |
53,576 |
58,371 |
Retained earnings |
23 |
69,827 |
57,826 |
Total equity |
|
466,994 |
358,468 |
Number of shares in issue |
|
335,768,782 |
261,795,015 |
EPRA NAV per share (pps) |
24 |
139.08 |
136.93 |
These financial statements were approved by the Board of
Directors of GCP Student Living plc on 14
September 2017 and signed on its behalf by:
Robert Peto
Chairman
Company number: 08420243
The accompanying notes below form an integral part of these
financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2017
|
Notes |
Share
capital
£’000 |
Share
premium
£’000 |
Special
reserve
£’000 |
Retained
earnings
£’000 |
Total
£’000 |
Balance at 1 July 2016 |
|
2,618 |
239,653 |
58,371 |
57,826 |
358,468 |
Total comprehensive income |
|
— |
— |
— |
23,474 |
23,474 |
Ordinary shares issued |
|
740 |
102,824 |
— |
— |
103,564 |
Share issue costs |
|
— |
(2,244) |
— |
— |
(2,244) |
Dividends paid in respect of the previous
year |
13 |
— |
— |
(1,651) |
(2,093) |
(3,744) |
Dividends paid in respect of the current year |
13 |
— |
— |
(3,144) |
(9,380) |
(12,524) |
Balance at 30 June 2017 |
|
3,358 |
340,233 |
53,576 |
69,827 |
466,994 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2016
|
Notes |
Share
capital
£’000 |
Share
premium
£’000 |
Hedging
reserve
£’000 |
Special
reserve
£’000 |
Retained
earnings
£’000 |
Total
£’000 |
Balance at 1 July 2015 |
|
1,099 |
39,946 |
(214) |
65,223 |
31,675 |
137,729 |
Profit for the year |
|
— |
— |
— |
— |
28,328 |
28,328 |
Other comprehensive income that may be
reclassified subsequently to profit and loss |
|
|
|
|
|
|
|
Fair value movement on financial derivative |
|
— |
— |
214 |
— |
— |
214 |
Total comprehensive income |
|
— |
— |
214 |
— |
28,328 |
28,542 |
Ordinary shares issued |
|
1,519 |
201,251 |
— |
— |
— |
202,770 |
Share issue costs |
|
— |
(1,544) |
— |
— |
— |
(1,544) |
Dividends paid in respect of the previous
year |
|
— |
— |
— |
(534) |
(1,005) |
(1,539) |
Dividends paid in respect of the current year |
13 |
— |
— |
— |
(6,318) |
(1,172) |
(7,490) |
Balance at 30 June 2016 |
|
2,618 |
239,653 |
— |
58,371 |
57,826 |
358,468 |
The accompanying notes below form an integral part of these
financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2017
|
Notes |
30 June 2017
£’000 |
30 June 2016
£’000 |
Cash flows from operating activities |
|
|
|
Operating profit |
|
28,308 |
39,326 |
Adjustments to reconcile profit for the year to
net operating cash flows: |
|
|
|
Gains from change in fair value of investment
properties |
3 |
(11,855) |
(27,156) |
Corporation tax (payments)/refunds |
|
(41) |
12 |
Decrease/(increase) in other receivables and
prepayments |
|
406 |
(3,120) |
Decrease in other payables and accrued
expenses |
|
(2,650) |
(4,891) |
Net cash flow generated from operating
activities |
|
14,168 |
4,171 |
Cash flows from investing activities |
|
|
|
Acquisition of investment properties |
|
(195,469) |
(54,469) |
Acquisition of subsidiaries net of cash
acquired |
|
— |
(156,092) |
Net cash used in investing activities |
|
(195,469) |
(210,561) |
Cash flows from financing activities |
|
|
|
Proceeds from issue of ordinary shares |
|
103,564 |
79,000 |
Share issue costs |
|
(2,244) |
(1,538) |
Proceeds from the issue of C shares |
|
— |
16,195 |
C share issue costs |
|
— |
(2,490) |
Bank loan drawn |
19 |
90,000 |
130,000 |
Repayment of bank loan |
|
— |
(40,000) |
Finance income |
|
70 |
75 |
Finance expenses |
|
(5,110) |
(5,942) |
Dividends paid in the year |
|
(16,206) |
(8,865) |
Net cash flow generated from financing
activities |
|
170,074 |
166,435 |
Net decrease in cash and cash
equivalents |
|
(11,227) |
(39,955) |
Cash and cash equivalents at start of the
year |
|
66,337 |
106,292 |
Cash and cash equivalents at end of the
year |
16 |
55,110 |
66,337 |
The accompanying notes below form an integral part of these
financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June
2017
1. General information
GCP Student Living plc is a closed ended investment company
incorporated in the UK on 26 February
2013. The registered office of the Company is located at 51
New North Road, Exeter EX4 4EP.
The Company’s shares are listed on the premium segment of the
Official List of the UKLA and are traded on the Premium Segment of
the LSE’s Main Market.
2. Basis of preparation
These financial statements are prepared in accordance with IFRS
issued by the IASB as adopted by the European Union. The financial
statements have been prepared under the historical cost
convention, except for investment property, which has been measured
at fair value. The audited financial statements are presented in
Pound Sterling and all values are rounded to the nearest thousand
pounds (£’000), except when otherwise indicated.
These financial statements are for the year ended 30 June 2017. Comparative figures are for the
previous accounting period, the year ended
30 June 2016.
The Group has chosen to adopt the EPRA best practice guidelines
for calculating key metrics such as net asset value and earnings,
which are presented alongside the IFRS measures.
2.1 Changes to accounting standards and
interpretations
The following new standards and amendments to existing standards
have been published and once approved by the EU, will be mandatory
for the Group’s accounting periods beginning after
1 July 2017 or later periods. The Group has
decided not to adopt them early.
-
IFRS 7 Financial Instruments: Disclosures – amendments regarding
additional hedge accounting disclosures (applies when IFRS 9
is applied).
-
IFRS 9 Financial Instruments (effective for annual periods
beginning on or after 1 January 2018).
-
IFRS 15 Revenue from Contracts (effective for annual periods
beginning on or after 1 January 2018).
-
IFRS 16 Leases (effective for annual periods beginning on or
after 1 January 2019).
The Group does not expect the adoption of new accounting
standards issued but not yet effective to have a significant impact
on its financial statements.
2.2 Significant accounting judgements
and estimates
The preparation of these financial statements in accordance with
IFRS requires the Directors of the Company to make judgements,
estimates and assumptions that affect the reported amounts
recognised in the financial statements. However, uncertainty about
these assumptions and estimates could result in outcomes that
require a material adjustment to the carrying amount of the asset
or liability in the future.
Judgements
In the process of applying the Group’s accounting policies,
management has made the following judgements which have the most
significant effect on the amounts recognised in the consolidated
financial statements:
Valuation of property
The valuations of the Group’s investment property are at fair value
as determined by the external valuer on the basis of market value
in accordance with the internationally accepted RICS Valuation –
Professional Standards January 2014
(incorporating the International Valuation Standards) and in
accordance with IFRS 13.
Operating lease commitments – group as lessor
The Group has entered into commercial property leases on its
investment property portfolio. The Group has determined, based on
evaluation of the terms and conditions of the arrangements, such as
the lease term not constituting a substantial portion of the
economic life of the commercial property, that it retains all the
significant risks and rewards of ownership of these properties and
recognises the contracts as operating leases.
Going concern
The Directors have made an assessment of the Group’s ability to
continue as a going concern and are satisfied that the Company has
the resources to continue in business for the foreseeable future,
for a period of not less than twelve months from the date of this
report. Furthermore, the Directors are not aware of any material
uncertainties that may cast significant doubt upon the Company’s
ability to continue as a going concern. Therefore, the financial
statements have been prepared on the going concern basis.
2.3 Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these financial statements are stated in the notes to the financial
statements.
a) Basis of consolidation
As a real estate entity the Company does not meet the definition of
an investment equity and therefore does not qualify for the
consolidation exception under IFRS 10. The consolidated financial
statements comprise the financial statements of the Group and its
subsidiaries as at 30 June 2017.
Subsidiaries are consolidated from the date of acquisition, being
the date on which the Group obtained control, and will continue to
be consolidated until the date that such control ceases. An
investor controls an investee when the investor is exposed, or has
rights to variable returns from its involvement with the investee
and has the ability to affect those returns through its power
over the investee. In preparing these financial statements,
intra-group balances, transactions and unrealised gains or losses
have been eliminated in full. The subsidiaries all have the same
year end as the Company. Uniform accounting policies are adopted in
the financial statements for transactions and events in similar
circumstances.
b) Functional and presentation currency
The overall objective of the Group is to generate returns in Pound
Sterling and the Group’s performance is evaluated in Pound
Sterling. Therefore, the Directors consider Pound Sterling as the
currency that most faithfully represents the economic effects of
the underlying transactions, events and conditions and have
therefore adopted it as the functional and presentation
currency.
c) Segmental reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being the investment and provision of
student accommodation facilities (including ancillary retail and
teaching facilities) in the UK.
3. UK investment property
|
Properties
under
development
£’000 |
Leasehold
£’000 |
Freehold
£’000 |
Total
£’000 |
As at 1 July 2016 |
— |
173,070 |
251,717 |
424,787 |
Acquisition of property |
— |
— |
138,952 |
138,952 |
Additional expenditure on properties |
— |
614 |
235 |
849 |
Land and development costs |
58,197 |
— |
— |
58,197 |
Fair value gains on revaluation of investment
property |
903 |
4,026 |
6,926 |
11,855 |
As at 30 June 2017 |
59,100 |
177,710 |
397,830 |
634,640 |
|
|
|
|
|
As at 1 July 2015 |
— |
— |
177,220 |
177,220 |
Acquisitions arising from business
combinations |
— |
166,100 |
— |
166,100 |
Acquisition of property |
— |
59 |
54,252 |
54,311 |
Fair value gains on revaluation of investment
property |
— |
6,911 |
20,245 |
27,156 |
As at 30 June 2016 |
— |
173,070 |
251,717 |
424,787 |
During the year the Group commenced construction of a
forward-funded development, Scape Wembley, which completed in
August 2017. The Group also purchased
Woburn Place via a wholly owned subsidiary, GCP Bloomsbury Limited.
The Group’s outstanding capital commitments in respect of the
forward funding of Scape Wembley were £20.2 million, subject to the
receipt of a licence fee which will reduce the amount payable to
the developer. At the balance sheet date, the licence fee could not
be reliably measured.
The amount paid for acquisition of investment property shown in
the consolidated statement of cash flows of £195,469,000 is cash
paid and does not take in account amounts due at the beginning or
end of the year.
Accounting policy
Investment property comprises property held to earn rental income
or for capital appreciation or both. Investment property is
measured initially at cost including transaction costs. Transaction
costs include transfer taxes and professional fees to bring the
property to the condition necessary for it to be capable of
operating. The carrying amount also includes the cost of replacing
part of an existing investment property at the time that cost is
incurred if the recognition criteria are met.
Subsequent to initial recognition, investment property is stated
at fair value. Gains or losses arising from changes in the fair
values are included in the income statement in the period in which
they arise under IAS 40 Investment Property.
The determination of the fair value of investment property
requires the use of estimates such as future cash flows from assets
(from lettings, tenants’ profiles, future revenue streams), capital
values of fixtures and fittings, plant and machinery, any
environmental matters and the overall repair and condition
of the property and discount rates applicable to those
assets.
Gains or losses on the disposal of investment property are
determined as the difference between net disposal proceeds and the
carrying value of the asset.
Investment properties under construction are measured at fair
value if the fair value is considered to be reliably determinable.
Properties of which the Company expects that the fair value will be
reliably determinable when construction is completed, are measured
at cost less impairment until the fair value becomes reliably
determinable or construction is completed, whichever is
earlier.
Investment properties under construction for which the fair
value cannot be determined reliably, but for which the Company
expects that the fair value of the property will be reliably
determinable when construction is completed, are measured at cost
less impairment until the fair value becomes reliably determinable
or construction is completed, whichever is earlier.
Licence fees (where income is receivable from a developer in
respect of a forward-funding agreement) are deducted from the cost
of investment and shown as a receivable until
settled.
4. Rental income
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Nomination rental income |
3,613 |
3,688 |
Direct let rental income |
22,093 |
16,623 |
Discounts |
(316) |
(426) |
Total student income |
25,390 |
19,885 |
Teaching space income |
420 |
471 |
Retail space income |
2,426 |
1,747 |
Gross rental income |
28,236 |
22,103 |
Service charge income |
375 |
264 |
Employee costs recharge income |
— |
115 |
Total |
28,611 |
22,482 |
The Company’s employees are overseen and managed by Scape, which
has overall responsibility for the provision of asset management
services. The Group employs the staff of the Asset and Facilities
Manager, Scape. Employee costs recharge income above represents
payroll costs relating to employee time spent on the Group’s
pipeline properties which were managed by Scape at the year end,
but had not yet been acquired by the Group.
Accounting policy
Rental income including direct lets to students, leases to
universities and commercial tenants receivable under operating
leases is recognised on a straight-line basis over the term of the
lease, except for contingent rental income which is recognised when
it arises.
Incentives for lessees to enter into lease agreements are spread
evenly over the lease term, even if the payments are not made on
such a basis. The lease term is the non-cancellable
period of the lease together with any further term for which the
tenant has the option to continue the lease,
where, at the inception of the lease, the Directors
are reasonably certain that the tenant will exercise that
option.
Service charges are recognised on an accruals basis and are
received to cover expenditure on hard and soft facilities
management.
5. Property operating and administration expenses
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Operating costs |
2,348 |
1,583 |
Utilities |
992 |
856 |
Insurance |
283 |
144 |
Sales and marketing |
283 |
249 |
Property maintenance |
173 |
38 |
Staff costs |
2,064 |
1,718 |
Ground rent |
138 |
234 |
Ancillary income |
(195) |
(222) |
Property operating expenses |
6,086 |
4,600 |
Investment management fees |
4,211 |
3,026 |
Directors’ remuneration |
173 |
121 |
Other administration expenses |
1,688 |
2,565 |
Administration expenses |
6,072 |
5,712 |
Total |
12,158 |
10,312 |
Included within administration expenses are investment
management fees, as disclosed in note 28 below and Directors’
remuneration as disclosed in note 6.
Ancillary income includes income received through such
activities as laundry, cleaning and vending machines.
Accounting policy
All property operating expenses and administration expenses are
charged to the income statement and are accounted for on an
accruals basis.
6. Directors’ remuneration
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Robert Peto |
45 |
34 |
Marlene Wood |
42 |
31 |
Peter Dunscombe |
37 |
28 |
Malcolm Naish |
37 |
28 |
Total |
161 |
121 |
A summary of the Directors’ emoluments, including the
disclosures required by the Companies Act 2006 is set out in the
Directors’ remuneration report in the full annual report and
financial statements.
7. Staff costs
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Salaries |
2,048 |
1,702 |
Other benefits |
16 |
17 |
Total |
2,064 |
1,719 |
With the exception of the Directors, whose remuneration is shown
in the Directors’ remuneration report, as at 30 June 2017 the Group employed 90 (2016: 74)
members of staff, with an average of 83 (2016: 72) employees during
the year.
Employee costs totalling £nil (2016: £115,000) have been
recharged to entities outside the Group. This amount is included
within revenue in note 4.
The Group operates a defined contributions pension scheme for
eight (2016: one) of its employees. The costs for the year ended
30 June 2017 totalled
£10,000 (2016: £4,000).
8. Auditor’s
remuneration
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Audit fee |
98 |
95 |
Other services |
9 |
255 |
Total |
107 |
350 |
The Company reviews the scope and nature of all proposed
non-audit services before engagement, to ensure that the
independence and objectivity of the Auditor are safeguarded. Audit
fees are comprised of the following items:
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Year end annual report and financial
statements |
26 |
26 |
Subsidiary accounts for the year ended 30 June
2017 |
72 |
— |
Subsidiary accounts for the year ended 30 June
2016 |
— |
69 |
Total |
98 |
95 |
For the year ended 30 June 2017,
the Auditor has provided a review of the half-yearly report and
financial statements for a fee of £9,000 (2016: £7,000).
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Reporting accountant services |
— |
28 |
Review of half-yearly report |
9 |
7 |
Tax advice |
— |
18 |
Tax compliance services for VAT |
— |
30 |
Tax compliance services for corporation tax
returns |
— |
119 |
Tax advice in respect of aborted property
purchases |
— |
53 |
Total |
9 |
255 |
The audit committee has considered the independence and
objectivity of the Auditor and has conducted a review of non-audit
services which the Auditor has provided during the year under
review. The audit committee receives an annual assurance from the
Auditor that its independence is not compromised by the provision
of such non-audit services.
9. Finance
income
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Income from cash and short-term deposits |
70 |
75 |
Total |
70 |
75 |
Accounting policy
Interest income is recognised on an effective interest rate basis
and shown within the income statement as finance income.
10. Finance expenses
Ongoing charges |
30 June 2017
£’000 |
30 June 2016
£’000 |
Swap interest |
— |
10 |
Loan interest |
4,610 |
3,239 |
Loan non-utilisation fee |
— |
15 |
Bank charges |
5 |
6 |
Loan arrangement fees amortised |
249 |
171 |
Total |
4,864 |
3,441 |
Exceptional charges |
30 June 2017
£’000 |
30 June 2016
£’000 |
Amortisation of loan arrangement fees |
— |
431 |
Swap break fees |
— |
255 |
Loan cancellation fees |
— |
610 |
Amortisation of C share issue costs |
— |
2,536 |
Return on C shares |
— |
3,803 |
Total |
— |
7,635 |
In the year ended 30 June 2016,
exceptional finance charges arose from two items:
-
The Group entered into significantly improved new financing
arrangements. The total costs of repaying the original bank
borrowings and breaking the Company’s interest rate swap was
£1,296,000.
-
Finance costs of £6,339,000 arising in the period which
represent:
i. issue costs of £2,536,000 which were treated as finance
cost rather than a reduction to equity due to the C shares being
recognised as debt; and
ii. the C shares issued during the year ended 30 June 2015, represented contracts for
conversion into a variable number of ordinary shares and therefore
the C shares were classified as liabilities under IFRS. The
return on the C shares of £3,803,000 represented an increase in the
assets attributable to the C shares over and above the funds
raised from their issue.
Accounting policy
Any finance costs that are separately identifiable and directly
attributable to a liability that will be in existence for a period
of time are amortised as part of the cost of the liability.
All other finance costs are expensed in the period in which they
occur. Finance costs consist of interest and other costs that an
entity incurs in connection with bank and other borrowings.
After initial recognition, C shares are subsequently measured at
amortised cost using the effective interest method. Amortisation is
credited/(charged) to finance income/(finance costs) in the
income statement. Transaction costs are amortised to the earliest
conversion period.
11. Taxation
Corporation tax has arisen as follows:
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Corporation tax on residual income for current
year |
— |
— |
Corporation tax on residual income for prior
periods |
40 |
(3) |
Total |
40 |
(3) |
Reconciliation of tax charge to profit before tax:
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Profit before tax |
23,514 |
28,325 |
Corporation tax at 19.75% (2016: 20.00%) |
4,644 |
5,665 |
Change in value of investment properties |
(2,341) |
(5,431) |
Tax exempt property rental business |
(2,789) |
(2,107) |
Amounts not deductible for tax purposes |
(66) |
1,367 |
Capital allowances |
(314) |
(318) |
Excess management expenses |
880 |
824 |
Other |
26 |
(3) |
Total |
40 |
(3) |
The Group has unrelieved excess tax losses of £4,312,000 (2016:
£2,831,000) it is unlikely that the Group will generate sufficient
taxable profits in the future to utilise these amounts and
therefore no deferred tax asset has been recognised.
Accounting policy
Corporation tax is recognised in the income statement except where
in certain circumstances corporation tax may be recognised in other
comprehensive income.
As a REIT, the Group is exempt from corporation tax on the
profits and gains from its property rental business, provided it
continues to meet certain conditions as per REIT
regulations.
Non-qualifying profits and gains of the Group (the residual
business) continue to be subject to corporation tax. Therefore,
current tax is the expected tax payable on the non-qualifying
taxable income for the year if applicable, using tax rates enacted
or substantively enacted at the balance sheet date.
12. Operating leases
Leases are typically direct let agreements with individual students
or HEIs for the academic year or a shorter period. The Group
also has a small number of commercial leases on teaching and
retail spaces and a number of nomination agreements whereby blocks
of beds are let out for a set number of years.
Future minimum rentals receivable under non-cancellable
operating leases as at 30 June 2017
are as follows:
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Within one year |
30,408 |
26,912 |
Between one and five years |
42,104 |
21,491 |
More than five years |
62,728 |
41,647 |
Total |
135,240 |
90,050 |
13. Dividends
|
30 June 2017 |
30 June 2016 |
|
Pence
per share |
£’000 |
Pence
per share |
£’000 |
For the year ended 30 June 2017 |
|
|
|
|
First interim dividend paid on 5 December
2016 |
1.43 |
3,744 |
1.41 |
1,549 |
Second interim dividend paid on 6 March 2017 |
1.43 |
3,979 |
1.41 |
2,871 |
Third interim dividend paid on 5 June 2017 |
1.43 |
4,801 |
1.41 |
3,070 |
Dividends paid during the year |
4.29 |
12,524 |
4.23 |
7,490 |
Fourth interim dividend paid on 5 September
20171 |
1.46 |
5,622 |
1.43 |
3,744 |
Total |
5.75 |
18,146 |
5.66 |
11,234 |
Paid as |
|
|
|
|
PIDs |
4.92 |
15,108 |
5.31 |
10,849 |
Ordinary dividends |
0.83 |
3,038 |
0.35 |
385 |
Total |
5.75 |
18,146 |
5.66 |
11,234 |
-
The fourth interim dividend is paid after the year end and is
not accrued in the financial statements.
As a REIT, the Company is required to pay PIDs equal to at least
90% of the property rental business profits of the Group. A fourth
interim PID for the year ended 30 June 2017 was paid on
5 September 2017.
Accounting policy
Dividends due to the Company’s shareholders are recognised when
they become payable. For interim dividends this is when they are
paid.
14. Earnings per share
Basic EPS is calculated by dividing profit for the year
attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares during the year. As
there are no dilutive instruments in issue, basic and diluted EPS
are identical. The following reflects the earnings and share data
used in the basic and diluted NAV per share computations:
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Group earnings for EPS |
23,474 |
28,328 |
Fair value gains on investment properties |
(11,855) |
(27,156) |
Group earnings for EPRA EPS |
11,619 |
1,172 |
Group specific adjustments: |
|
|
Exceptional finance costs per note 10 |
— |
7,635 |
Other exceptional items |
394 |
884 |
Licence fees receivable on forward funded
developments |
1,421 |
— |
Capitalised rental guarantee |
189 |
— |
Group specific adjusted earnings |
13,623 |
9,691 |
|
30 June 2017
Pence
per share |
30 June 2016
Pence
per share |
Basic Group EPS |
8.08 |
15.48 |
Basic Group EPRA EPS |
3.99 |
0.64 |
Diluted Group EPS |
8.08 |
15.48 |
Diluted Group EPRA EPS |
3.99 |
0.64 |
Group specific adjusted EPS |
4.62 |
5.30 |
|
30 June 2017
Number
of shares |
30 June 2016
Number
of shares |
Weighted average number of shares in issue |
290,504,478 |
183,007,508 |
A third Group specific adjusted EPS calculation has been made to
show EPRA earnings excluding the exceptional one-off costs arising
in the year. The costs have arisen from the following items:
1. For the year ended 30 June
2017:
i. Migration
costs relating to the Main Market of the LSE of £394,000
ii. Licence fees
from the developer of Scape Wembley in respect of a forward-funding
agreement of £1,421,000
iii. A rental
guarantee in respect of Woburn Place of £189,000 which was
capitalised
2. For the year ended 30 June
2016:
i. costs of
repaying and breaking the original bank borrowings and interest
rate swap totalling £1,296,000
ii. Finance
costs of £6,339,000 arising from the accounting treatment of the C
shares. For further details please refer to note 10.
15. Subsidiaries
The financial statements comprise the financial statements of the
Company and its subsidiaries, GCP Topco Limited, GCP Holdco
Limited, GCP Scape East Limited, GCP Brunswick Limited (formerly
Ternion (Danehurst) Limited), GCP Operations Limited, Leopard
Guernsey Greenwich JV Limited, Leopard Guernsey Greenwich Limited,
Leopard Guernsey Greenwich 2 Limited, Old Street Acquisitions
Limited, Leopard Guernsey Old Street Limited, Leopard Guernsey Old
Street 2 Limited, GCP RHUL Limited, GCP SG Limited, GCP WL Limited,
GCP Wembley 2 Limited (formerly GCP Brunswick 2 Limited), GCP
Wembley Limited (formerly GCP Apex Limited), GCP RHUL 2 Limited,
GCP Bloomsbury Limited, GCP Holdco 2 Limited, and GCP Topco 2
Limited for the year ended 30 June
2017, and the comparative year for the year ended 30 June
2016.The Company also owns a dormant subsidiary: GCP Brighton
Limited which had not yet commenced activities at the year end.
Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtained control,
and will continue to be consolidated until the date when such
control ceases. The financial statements of the subsidiaries are
prepared for the same reporting period as the parent company, using
consistent accounting policies. All intra-group balances,
transactions, unrealised gains and losses resulting from
intra-group transactions and distributions are eliminated in full.
The Company has a 100% beneficial interest (whether directly or
indirectly), in the issued share capital of all subsidiaries.
On 7 March 2017, GCP Topco 2
Limited and GCP Holdco 2 Limited were incorporated as wholly owned
subsidiaries of GCP Student Living plc. These companies were
dormant until 30 March 2017. On
7 March 2017, GCP Bloomsbury Limited
became a wholly owned subsidiary of GCP Holdco 2 Limited. Also on
that date GCP Holdco 2 Limited became a subsidiary of GCP
Topco 2 Limited.
On 30 March 2017, GCP Holdco 2
Limited took over direct ownership of GCP WL Limited and GCP
RHUL 2 Limited from GCP Student Living plc in a share for share
exchange.
On 30 March 2017, GCP Topco 2
Limited took over direct ownership of GCP Holdco 2 Limited from GCP
Student Living plc, in a share for share exchange.
GCP Bloomsbury Limited, incorporated 21
February 2017, was dormant until 5
April 2017, when it acquired Woburn Place. The principal
activity of the company is the provision of student
accommodation in line with the Group’s investment strategy.
GCP Wembley Limited (formerly GCP Apex Limited), incorporated
15 June 2016, was dormant until it
commenced construction of Scape Wembley. The principal activity of
the company is the provision of student accommodation in line with
the Group’s investment strategy.
Company |
Country of
registration,
incorporation
and operation |
Number and
class of share
held by
the Group |
Group holding |
Capital and
reserves at
30 June 2017
£’000 |
Profit
after
tax for the
year ended
30 June 2017
£’000 |
GCP Wembley Limited (formerly GCP Apex
Limited)2 |
UK |
10 ordinary
shares |
100% |
60,694 |
694 |
GCP Brighton Limited2 |
UK |
2 ordinary shares |
100% |
— |
— |
GCP Bloomsbury Limited2 |
UK |
6 ordinary shares |
100% |
50,550 |
602 |
GCP Brunswick Limited1,2 |
UK |
1,046,728,191 ordinary
shares |
100% |
15,390 |
638 |
GCP Wembley 2 Limited (formerly GCP Brunswick 2
Limited)1,2 |
UK |
2 ordinary shares |
100% |
2 |
— |
GCP Holdco Limited1,2 |
UK |
5 ordinary shares |
100% |
301,142 |
23,796 |
GCP Holdco 2 Limited1,2 |
UK |
10 ordinary
shares |
100% |
70,234 |
1,258 |
GCP Operations Limited2 |
UK |
2 ordinary shares |
100% |
74 |
86 |
GCP RHUL Limited1,2 |
UK |
4 ordinary shares |
100% |
20,570 |
1,990 |
GCP RHUL 2 Limited2 |
UK |
2 ordinary shares |
100% |
(14) |
(14) |
GCP Scape East Limited1,2 |
UK |
51,508,283 ordinary
shares |
100% |
91,035 |
8,123 |
GCP SG Limited1,2 |
UK |
4 ordinary shares |
100% |
24,321 |
2,374 |
GCP Topco Limited2 |
UK |
3 ordinary shares |
100% |
301,125 |
23,793 |
GCP Topco 2 Limited2 |
UK |
10 ordinary
shares |
100% |
70,228 |
1,253 |
GCP WL Limited2 |
UK |
3 ordinary shares |
100% |
19,719 |
1,410 |
Leopard Guernsey Greenwich
Limited1,3 |
Guernsey |
102 ordinary
shares |
100% |
28,646 |
3,129 |
Leopard Guernsey Greenwich 2
Limited1,3 |
Guernsey |
102 ordinary
shares |
100% |
1,160 |
104 |
Leopard Guernsey Greenwich JV
Limited1,3 |
Guernsey |
103 ordinary
shares |
100% |
54,800 |
3,214 |
Leopard Guernsey Old Street
Limited1,3 |
Guernsey |
100 ordinary
shares |
100% |
100,180 |
8,556 |
Leopard Guernsey Old Street 2
Limited1,3 |
Guernsey |
100 ordinary
shares |
100% |
629 |
384 |
Old Street Acquisitions Limited1,3 |
Guernsey |
450 A ordinary
shares |
100% |
98,785 |
8,848 |
|
|
550 B ordinary
shares |
|
|
|
-
Indirect subsidiaries.
-
Registered office: Beaufort
House, 51 New North Road, Exeter, EX4 4EP
-
Registered office: Weighbridge House, The Puller, St Peter Port,
Guernsey, GY1 1WL
Accounting policy
Where property is acquired, via corporate acquisition or otherwise,
management considers the substance of the assets and activities of
the acquired entity in determining whether the
acquisition represents the acquisition of a business.
Where such acquisitions are not judged to be an acquisition of a
business, they are not treated as business combinations. Rather,
the cost to acquire the corporate entity is allocated between the
identifiable assets and liabilities of the entity based on their
relative fair values at the acquisition date. Accordingly, no
goodwill or additional deferred taxation arises. Otherwise,
acquisitions are accounted for as business combinations.
Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured as the aggregate of
the consideration transferred, measured at acquisition date fair
value and the amount of any non-controlling interest in the
acquiree.
For each business combination, the acquirer measures the
non-controlling interest in the acquiree at fair value of the
proportionate share of the acquiree’s identifiable net assets.
Acquisition costs (except for costs of issue of debt or equity) are
expensed in accordance with IFRS 3 Business Combinations.
When the Group acquires a business, it assesses the financial
assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition
date.
Contingent consideration is deemed to be equity or a liability
in accordance with IAS 32. If the contingent consideration is
classified as equity, it is not re-measured and its subsequent
settlement shall be accounted for within equity. If the contingent
consideration is classified as a liability, subsequent
changes to the fair value are recognised either in profit or
loss or as a change to other comprehensive income.
16. Cash and cash equivalents
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Cash and cash equivalents |
25,808 |
57,565 |
Subsidiary cash and cash equivalents |
29,302 |
8,772 |
Total |
55,110 |
66,337 |
Accounting policy
Cash and cash equivalents comprise cash at bank and short-term
deposits with banks and other financial institutions, with an
initial maturity of three months or less.
17. Trade and other receivables
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Prepayments |
799 |
254 |
Rent receivable |
793 |
581 |
Amounts held on deposit |
— |
2,000 |
Cash held by rental agents |
1,845 |
1,518 |
Licence fees |
1,430 |
— |
Lease incentives |
2,482 |
1,415 |
Other receivables |
168 |
1,099 |
Total |
7,517 |
6,867 |
Accounting policy
Rent and other receivables are recognised at their original
invoiced value. An impairment provision is made when there is
objective evidence that the Group will not be able to recover
balances in full. Balances are written off when the probability of
recovery is assessed as being remote.
Licence fees represent income receivable from a developer in
respect of a forward-funding agreement which deducted from the cost
of investment at completion and shown as a receivable
until settled.
Lease incentives including rent free periods and payments to
tenants are allocated to the statement of comprehensive income on a
straight-line basis over the lease term.
18. Other payables and accrued
expenses
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Property operating expenses payable |
1,715 |
3,359 |
Finance expenses payable |
883 |
425 |
Other expenses payable |
2,242 |
2,330 |
Trade and other payables |
4,840 |
6,114 |
Deferred income |
7,964 |
5,235 |
Total |
12,804 |
11,349 |
Accounting policy
Trade and other payables are initially recognised at fair value and
subsequently held at amortised cost.
Deferred income is rental income received in advance during the
accounting period. The income is deferred and is unwound to rental
income on a straight-line basis over the period in which it is
earned.
19. Interest bearing loans and
borrowings
|
|
30 June
2016 |
|
30 June 2017
£’000 |
New facility
£’000 |
Previous facility
£’000 |
Loans drawn down at the start of the year |
130,000 |
— |
40,000 |
Repayment of initial loan |
— |
— |
(40,000) |
Loan drawn down |
90,000 |
130,000 |
— |
Total loans drawn down |
220,000 |
130,000 |
— |
Unamortised loan arrangement fees brought
forward |
(1,826) |
— |
224 |
Loan arrangement fees for the year |
(953) |
(1,997) |
(655) |
Amortised in the year |
248 |
171 |
431 |
Unamortised loan arrangement fees carried
forward |
(2,531) |
(1,826) |
— |
Loan balance less unamortised loan arrangement
fees |
217,469 |
128,174 |
— |
The Group has a secured facility for up to £130 million of
borrowings at a fixed rate of 3.07% which is set to mature
in September 2024. On 3 April
2017, the Group increased the secured facility by £40
million at a fixed rate of 2.83%, on 5 April
2017 the Group drew down the additional £40 million. On
3 April 2017 the Group secured an
additional facility for up to £65 million of borrowings at a
fixed rate of 2.82%, the Group drew down £50 million on
5 April 2017.
The Group uses gearing to enhance returns over the long term.
The level of gearing is governed by careful consideration of the
cost of borrowing and the Group uses hedging or otherwise seeks to
mitigate the risk of interest rate increases. Gearing, represented
by borrowings as a percentage of gross assets, will not exceed 55%
at the time of investment. It is the Directors’ current intention
to target gearing of less than 30% of gross assets in the long term
and to comply with the REIT condition relating to the ratio
between the Group’s ‘property profits’ and ‘property finance
costs’.
The debt facilities include loan-to-value of and interest cover
covenants that are measured at a Group level. The Group has
maintained significant headroom against all measures throughout the
financial period and is in full compliance with all loan covenants
at 30 June 2017.
Leverage
For the purposes of the AIFMD, leverage is any method which
increases the Company’s exposure, including the borrowing of cash
and the use of derivatives. It is expressed as a ratio
between the Company’s exposure and its net asset value and is
calculated under the gross and commitment methods, in accordance
with AIFMD.
The Company is required to state its maximum and actual leverage
levels, calculated as prescribed by the AIFMD as at 30 June 2017, figures are as follows:
Leverage exposure |
Maximum limit |
Actual exposure |
Gross method |
155% |
136% |
Commitment method |
155% |
136% |
Accounting policy
Loans and borrowings are initially recognised at the proceeds
received net of directly attributable transaction costs. Loans and
borrowings are subsequently measured at amortised cost with
interest charged to the income statement at the effective interest
rate, and shown within finance expenses. Transaction costs are
spread over the term of loan.
20. Financial derivatives and
hedging
|
30 June 2017
Total
£’000 |
30 June 2016
Total
£’000 |
Interest rate swap at fair value: |
|
|
Fair value at start of year |
— |
(214) |
Change in valuation |
— |
— |
Termination of swap contract |
— |
214 |
Fair value of financial derivatives |
— |
— |
Cash flow hedges
On 30 September 2015, the Group
terminated its interest swap contract. Break costs of £214,000 were
incurred and expensed within finance costs in the consolidated
statement of comprehensive income in the prior year.
The Group’s interest rate swap was used to hedge the exposure to
the variable interest rate payments on the variable rate element of
the Company’s secured loans.
Derivatives are classified in Level 2 in the fair value
hierarchy under IFRS 13.
Accounting policy
The Group uses interest rate swaps to hedge its risks associated
with interest rates. Such derivative financial instruments are
initially recognised at fair value on the date on which a
derivative contract is entered into and are subsequently
re-measured at fair value. Derivatives are recognised as an asset
when the fair value is positive and as a liability when the fair
value is negative.
21. Share capital
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Issued and fully paid: |
|
|
At the start of the year |
2,618 |
1,099 |
Shares issued on conversion of C shares 93,725,280
ordinary shares of £0.01 each |
— |
937 |
Shares issued on 12 February 2016 14,074,075
ordinary shares of £0.01 each |
— |
141 |
Shares issued on 24 May 2016 44,085,232 ordinary
shares of £0.01 each |
— |
441 |
Shares issued on 20 December 2016 16,428,572
ordinary shares of £0.01 each |
164 |
— |
Shares issued on 24 February 2017 57,545,195
ordinary shares of £0.01 each |
576 |
— |
Balance at the end of the year |
3,358 |
2,618 |
The share capital comprises one class of ordinary shares. At
general meetings of the Company, ordinary shareholders are entitled
to one vote on a show of hands and on a poll, to one vote for
every share held. There are no restrictions on the size of a
shareholding or the transfer of shares, except for the
UK REIT restrictions.
22. Share premium
|
30 June 2017
£’000 |
30 June 2016
£’000 |
At the start of the year |
239,653 |
39,946 |
Shares issued on conversion of C shares |
— |
122,833 |
Shares issued on 12 February 2016 |
— |
18,859 |
Shares issued on 24 May 2016 |
— |
59,559 |
Shares issued on 20 December 2016 |
22,836 |
— |
Shares issued on 24 February 2017 |
79,988 |
— |
Share issue costs |
(2,244) |
(1,544) |
Balance at the end of the year |
340,233 |
239,653 |
23. Capital and reserves
Share capital
Share capital is equal to the nominal amount of the Company’s
ordinary shares in issue.
Share premium
Share premium relates to amounts subscribed for share capital in
excess of nominal value less associated issue costs of the
subscriptions. On 31 July 2013,
the Company by way of special resolution cancelled the value
of its share premium account at that date, by an Order of the High
Court of Justice, Chancery Division. As a result of this
cancellation, £67.4 million was transferred from share premium to
the special reserve in the financial period ended 30 June 2014.
Share premium comprises the following cumulative amounts:
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Issue of share capital |
415,076 |
312,252 |
Share issue costs |
(7,485) |
(5,241) |
Share premium cancelled |
(67,358) |
(67,358) |
Share premium |
340,233 |
239,653 |
Hedging reserve
The hedging reserve comprises the effective portion of the
cumulative net change in the fair value of cash flow hedging
instruments. At 30 June 2017, the
Group’s hedging reserve was £nil.
Special reserve
The special reserve represents the cancelled share premium less
dividends paid from this reserve.
The special reserve comprises the following cumulative
amounts:
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Cancelled share premium |
67,358 |
67,358 |
Dividends paid from reserves |
(13,782) |
(8,987) |
Special reserve |
53,576 |
58,371 |
Retained earnings
Retained earnings represent the profits of the Group less dividends
paid from revenue profits to date. It should be noted that
unrealised gains on the revaluation of investment properties
contained within this reserve are not distributable until any gains
crystallise on the sale of the investment property.
Retained earnings comprise the following cumulative amounts:
|
30
June 2017
£’000 |
30 June 2016
£’000 |
Total unrealised gains on investment
properties |
69,827 |
57,826 |
Total revenue profits |
20,965 |
9,492 |
Dividends paid from revenue
profits |
(20,965) |
(9,492) |
Retained earnings |
69,827 |
57,826 |
24. Net asset value per share
Basic NAV per share amounts are calculated by dividing net assets
attributable to ordinary equity holders of the Company in the
statement of financial position by the number of ordinary
shares outstanding at the end of the year. As there are no dilutive
instruments in issue, basic and diluted NAV per share are
identical. The following reflects the net asset and share data used
in the basic and diluted NAV per share computations:
|
30 June 2017
Pence
per share |
30 June 2016
Pence
per share |
EPRA NAV (pps) |
139.08 |
136.93 |
The EPRA NAV may be calculated as:
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Net assets attributable to ordinary
shareholders |
466,994 |
358,468 |
Net assets for calculation of EPRA NAV |
466,994 |
358,468 |
Number of shares in issue |
335,768,782 |
261,795,015 |
25. Fair value
IFRS 13 defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement
date. The following methods and assumptions were used to estimate
the fair values.
The fair value of cash and short-term deposits, trade
receivables, trade payables and other current liabilities
approximate their carrying amounts due to the short-term maturities
of these instruments.
Interest-bearing loans and borrowings are disclosed at amortised
cost. The carrying value of the loans and borrowings approximate
their fair value due to the contractual terms and conditions of the
loan.
Quarterly valuations of investment property are performed by
Knight Frank LLP, an accredited external valuer with recognised and
relevant professional qualifications and recent experience of the
location and category of the investment property being valued,
however the valuations are the ultimate responsibility of the
Directors, who appraise these quarterly.
The valuation of the Company’s investment property at fair value
is determined by the external valuer on the basis of market value
in accordance with the internationally accepted RICS Valuation –
Professional Standards January 2014
(incorporating the International Valuation Standards).
The determination of the fair value of investment property
requires the use of estimates such as future cash flows from assets
(such as lettings, tenants’ profiles, future revenue streams),
the capital values of fixtures and fittings, plant and machinery,
any environmental matters and the overall repair and condition
of the property) and discount rates applicable to those
assets.
The following tables show an analysis of the fair values of
investment properties recognised in the statement of financial
position by level of the fair value hierarchy1:
|
30
June 2017 |
Assets and liabilities measured at fair value |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
Investment properties |
— |
— |
634,640 |
634,640 |
Total |
— |
— |
634,640 |
634,640 |
|
30 June
2016 |
Assets and liabilities measured at fair value |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
Investment properties |
— |
— |
424,787 |
424,787 |
Total |
— |
— |
424,787 |
424,787 |
-
Explanation of the fair value hierarchy:
- Level 1 – quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access at the
measurement date;
- Level 2 – use of a model with inputs (other than quoted prices
included in Level 1) that are directly or indirectly observable
market data; and
- Level 3 – use of a model with inputs that are not based on
observable market data.
Valuation techniques and significant inputs within the
valuation of investment properties
The following table analyses:
-
the fair value measurements at the end of the reporting
period;
-
a description of the valuation techniques applied;
-
the inputs used in the fair value measurement, including the
ranges of rent charged to different units within the same building;
and
-
for Level 3 fair value measurements, quantitative information
about significant unobservable inputs used in the fair value
measurement.
Class |
Fair value |
Valuation technique |
Key unobservable inputs |
Range |
Student property 30 June
2017 |
£575,540,000 |
Income capitalisation |
ERV – 2016/17 |
£164 – £610 per week |
|
|
|
Rental growth |
2.0% – 3.0% |
|
|
|
Tenancy period |
51 weeks |
|
|
|
Sundry income |
£50 -£100 per bed per
annum |
|
|
|
Facilities management
cost |
£2,050– 2,500 per bed
per annum |
|
|
|
Initial yield |
4.76% – 5.75% blended |
|
|
|
|
(4.75% – 7.50%) |
Student property |
£424,787,000 |
Income capitalisation |
ERV – 2015/16 |
£164.50 – £430 per week |
30 June 2016 |
|
|
Rental growth |
2.5% – 3.0% |
|
|
|
Tenancy period |
51 weeks |
|
|
|
Sundry income |
£50 – £100 per bed per annum |
|
|
|
Facilities management cost |
£1,950 – £2,150 per bed
per annum |
|
|
|
Initial yield |
4.75% – 5.75% blended |
|
|
|
|
(4.75% – 7.50%) |
The fair value of student property as at 30 June 2017 (£575,540,000) above excludes Scape
Wembley, which has been valued at the sum of land plus development
costs (£59,100,000) which is assessed to be equivalent to the fair
value at the year end.
Sensitivity analysis to significant changes in unobservable
inputs within the valuation of investment properties
Significant increases/decreases in the ERV (per sq ft p.a.) and
rental growth p.a. in isolation would result in a significantly
higher/lower fair value measurement. Significant
increases/decreases in the long-term vacancy rate and discount rate
(and exit yield) in isolation would result in a significantly
higher/lower fair value measurement.
Generally, a change in the assumption made for the ERV (per sq
ft p.a.) is accompanied by:
Gains and losses recorded in profit or loss for recurring fair
value measurements categorised within Level 3 of the fair value
hierarchy amount to £11,855,000 (2016: £27,156,000) and are
presented in the consolidated statement of comprehensive income in
line item ‘fair value gains on investment properties’.
All gains and losses recorded in profit or loss for recurring
fair value measurements categorised within Level 3 of the fair
value hierarchy are attributable to changes in unrealised gains or
losses relating to investment property held at the end of the
reporting period.
The carrying amount of the Company’s assets and liabilities is
considered to be the same as their fair value.
26. Financial risk management objectives and policies
The Company’s principal financial liabilities are long-term loans
and borrowings. The main purpose of the Company’s loans and
borrowings is to finance the acquisition of the Company’s property
portfolio. The Company has trade and other receivables, trade and
other payables and cash and short-term deposits that arise directly
from its operations.
The Company is exposed to market risk, interest rate risk,
credit risk and liquidity risk. The Board of Directors reviews and
agrees policies for managing each of these risks which are
summarised below.
Market risk
Market risk is the risk that future values of investments in
property and related investments will fluctuate due to changes in
market prices. The total exposure at the statement of
financial position date is £634,640,000 and to manage this risk,
the Group diversifies its portfolio across a number of assets.
Market risk is also the risk that the fair values of financial
instruments will fluctuate because of changes in market prices. The
derivative financial instruments that were held by the Company
in the prior period, were all fixed terms at fixed rates with the
floating elements hedged against 50% of total borrowings. The
Company’s exposure to market risk was limited to the remaining 50%
which was not hedged.
Interest rate risk
Interest rate risk is the risk that the future cash flows of a
financial instrument will fluctuate because of changes in market
interest rates. The Company’s exposure to the risk of changes in
market interest rates relates is minimal as it has taken out a
fixed rate loan.
Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit
risk from its financing activities, including deposits with banks
and financial institutions.
Credit risk is managed by requiring tenants to pay rentals in
advance. The credit quality of the tenant is assessed at the time
of entering into a lease agreement. Outstanding tenants’
receivables are regularly monitored. The maximum exposure to credit
risk at the reporting date is the carrying value of each class of
financial asset.
The following table analyses the Group’s exposure to credit
risk:
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Retention account |
308 |
815 |
Cash and cash equivalents |
55,110 |
66,337 |
Trade and other receivables |
7,517 |
6,867 |
Total |
62,935 |
74,019 |
The retention account, cash and cash equivalents are held with
Barclays Bank PLC, which holds an A credit rating, with the
exception of £15 million held with Landesbank-Thüringen
Girozentrale (Helaba) which holds also an A credit rating.
Liquidity risk
Liquidity risk is defined as the risk that the Group will encounter
difficulty in meeting obligations associated with financial
liabilities that are settled by delivering cash or another
financial asset. Exposure to liquidity risk arises because of the
possibility that the Group could be required to pay its liabilities
earlier than expected. The Group’s objective is to maintain a
balance between continuity of funding and flexibility through the
use of bank deposits and loans.
The table below summarises the maturity profile of the Group’s
financial liabilities based on contractual undiscounted
payments:
Year ended 30 June 2017 |
Less
than three
months
£’000 |
Three
to twelve
months
£’000 |
One to
two years
£’000 |
Two to
five years
£’000 |
More than
five years
£’000 |
Total
£’000 |
Interest bearing loans and borrowings |
— |
4,904 |
6,533 |
19,599 |
235,058 |
266,094 |
Trade and other payables |
4,586 |
254 |
— |
— |
— |
4,840 |
Retention account |
— |
— |
308 |
— |
— |
308 |
Total |
4,586 |
5,158 |
6,841 |
19,599 |
235,058 |
271,242 |
Year ended 30 June 2016 |
Less
than three
months
£’000 |
Three
to twelve
months
£’000 |
One to
two years
£’000 |
Two to
five years
£’000 |
More than
five years
£’000 |
Total
£’000 |
Interest bearing loans and borrowings |
1,006 |
2,985 |
3,941 |
11,984 |
145,975 |
165,891 |
Trade and other payables |
774 |
5,340 |
— |
— |
— |
6,114 |
Retention account |
— |
— |
815 |
— |
— |
815 |
Total |
1,780 |
8,325 |
4,756 |
11,984 |
145,975 |
172,820 |
27. Capital management
The Group’s capital is represented by share capital, reserves and
borrowings.
The primary objective of the Group’s capital management is to
ensure that it remains within its quantitative banking covenants
and maintains a strong credit rating. No changes were made in the
objectives, policies or processes during the period.
The Group may use gearing to enhance returns over the long term.
The level of gearing will be governed by careful consideration of
the cost of borrowing and the Group may use hedging or otherwise
seek to mitigate the risk of interest rate increases. Gearing,
represented by borrowings as a percentage of gross assets, will not
exceed 55% at the time of investment. It is the Directors’ current
intention to target gearing of less than 30% of gross assets in the
long term and to comply with the REIT condition relating to the
ratio between the Group’s property profits and property finance
costs. As at the year end, the Group was operating with a
loan-to-value of 32% (30 June 2016:
27%).
During the year, the Group did not breach any of its loan
covenants, nor did it default on any other of its obligations under
its loan agreement.
28. Related party transactions
Directors
The Directors (all non-executive Directors) of the Company and
subsidiaries are considered to be the key management personnel of
the Group. Directors’ remuneration for the year totalled £161,000
and at 30 June 2017, a balance of
£nil (2016: £13,000) was outstanding. Further information is given
in note 6.
Investment Manager
The Company is party to an investment management agreement with the
Investment Manager, pursuant to which the Company has appointed the
Investment Manager to provide investment management services
relating to the respective assets on a day-to-day basis in
accordance with the Company’s investment objective and policy,
subject to the overall supervision and direction by the Board of
Directors.
For its services to the Company, the Investment Manager receives
an annual fee at the rate of 1% of the Net Asset Value of the
Company (or such lesser amount as may be demanded by the Investment
Manager at its own absolute discretion).
The Investment Manager has committed additional resource in
providing its client funds, including the Company, a more
comprehensive service which strengthens the level of transaction
and marketing support for the Company, in a cost efficient manner.
The Investment Manager receives a fee of 0.3% of the aggregate
gross proceeds from any issue of new shares in consideration for
the provision of marketing and investor introduction services. The
Investment Manager has appointed Highland Capital Partners Limited
to assist it with the provision of such services and pays all fees
due to Highland Capital Partners Limited out of the fees it
receives from the Company.
The Investment Manager receives an annual fee of £22,500 in
relation to its role as the Company’s AIFM, subject to an RPI
increase.
During the year, the Group incurred £4,667,000 (2016:
£3,354,000) in respect of investment management fees, the AIFM fee
and transaction management and documentation services. A total of
£4,211,000 is included within administration expenses in the
consolidated income statement and £451,000 is included within the
share issue costs relating to shares issued during the year. As at
30 June 2017 £1,170,000 (2016:
£897,000) was outstanding.
With effect from 22 July 2014, the
Company’s Investment Manager was authorised as an AIFM by the FCA
under the AIFMD regulations. The Company has provided disclosures
on its website, www.graviscapital.com/funds/gcp-student,
incorporating the requirements of the AIFMD regulations.
Subsidiaries
GCP Student Living plc as at 30 June
2017 owns a 100% controlling stake, whether directly or
indirectly, in GCP Topco Limited, GCP Holdco Limited, GCP Scape
East Limited, GCP Brunswick Limited, GCP Wembley 2 Limited
(formerly GCP Brunswick 2 Limited), GCP Operations Limited, Leopard
Guernsey Greenwich JV Limited, Leopard Guernsey Greenwich Limited,
Leopard Guernsey Greenwich 2 Limited, Old Street Acquisitions
Limited, Leopard Guernsey Old Street Limited, Leopard Guernsey Old
Street 2 Limited, GCP RHUL Limited and GCP RHUL 2 Limited, GCP WL
Limited, GCP Wembley Limited (formerly GCP Apex Limited), GCP SG
Limited, GCP Bloomsbury Limited, GCP Holdco 2 Limited, GCP Topco 2
Limited and GCP Brighton Limited respectively.
The tables below disclose the transactions and balances between
the Company and subsidiary entities:
Transactions |
30 June 2017
£’000 |
30 June 2016
£’000 |
Recharges of fund level expenses to: |
|
|
GCP Scape East Limited |
494 |
285 |
GCP Brunswick Limited |
7 |
20 |
Leopard Guernsey Greenwich 2 Limited |
195 |
138 |
GCP SG Limited |
95 |
51 |
GCP RHUL Limited |
142 |
74 |
Leopard Guernsey Old Street 2 Limited |
670 |
340 |
GCP WL Limited |
78 |
21 |
GCP Wembley Limited (formerly GCP Apex
Limited) |
161 |
— |
GCP Bloomsbury Limited |
142 |
— |
GCP Topco Limited |
5 |
5 |
GCP Holdco Limited |
5 |
5 |
GCP Operations Limited |
10 |
17 |
GCP Topco 2 Limited |
3 |
— |
GCP Holdco 2 Limited |
3 |
— |
GCP RHUL2 Limited |
2 |
— |
During the year, the Company received a long-term loan of £40
million from GCP Topco Limited and subsequently granted a long-term
loan of £40 million to GCP Topco 2 Limited.
Balances |
30 June 2017
£’000 |
30 June 2016
£’000 |
Other intercompany balances due
from/(to): |
|
|
GCP Topco Limited |
(41,684) |
4,182 |
GCP WL Limited |
(928) |
468 |
GCP Operations Limited |
(79) |
41 |
GCP Wembley Limited (formerly GCP Apex
Limited) |
15,393 |
— |
GCP RHUL 2 Limited |
20 |
— |
GCP Topco 2 Limited |
38,158 |
— |
On 7 March 2017, GCP Bloomsbury
Limited became a wholly owned subsidiary of GCP Holdco 2 Limited.
Also on that date GCP Holdco 2 Limited became a subsidiary of GCP
Topco Limited. GCP WL Limited became a subsidiary of GCP Holdco 2
Limited on 30 March 2017.
The following information is an analysis of the investments made
by the Company during the year.
Company |
30 June 2017
£’000 |
GCP WL Limited |
19,028 |
GCP Bloomsbury Limited |
49,948 |
Total |
68,976 |
29. Events after the reporting period
On 7 July 2017, the Company issued
49,295,774 ordinary shares at a placing price of 142 pence per share, raising gross proceeds of
£70 million for the Company, substantially exceeding target gross
proceeds.
On 4 July 2017, the Company
entered into a contract to acquire and forward fund the
construction of Circus Street, Brighton. The costs of acquiring and forward
funding the construction is expected to be approximately £70
million, which will be funded by the net proceeds of the placing of
new ordinary shares outlined above.
Scape Wembley completed construction in August 2017 and is open to students for the
2017/18 academic year.
On 17 August 2017, the names of
the Company’s subsidiaries GCP Apex Limited and GCP Brunswick 2
Limited were changed to GCP Wembley Limited and GCP Wembley 2
Limited respectively.
30. Ultimate controlling party
It is the view of the Directors that there is no ultimate
controlling party.
COMPANY STATEMENT OF FINANCIAL POSITION
As at 30 June 2017
|
Notes |
30 June 2017
£’000 |
30 June 2016
£’000 |
Assets |
|
|
|
Non-current assets |
|
|
|
Investment in subsidiary companies |
3 |
432,120 |
305,574 |
|
|
432,120 |
305,574 |
Current assets |
|
|
|
Cash and cash equivalents |
4 |
25,808 |
57,565 |
Trade and other receivables |
5 |
55,482 |
2,040 |
|
|
81,290 |
59,605 |
Total assets |
|
513,410 |
365,179 |
Liabilities |
|
|
|
Current liabilities |
|
|
|
Trade and other payables |
6 |
(46,416) |
(6,711) |
Total liabilities |
|
(46,416) |
(6,711) |
Net assets |
|
466,994 |
358,468 |
Equity |
|
|
|
Share capital |
|
3,358 |
2,618 |
Share premium |
|
340,233 |
239,652 |
Retained earnings |
|
123,403 |
116,198 |
Total equity |
|
466,994 |
358,468 |
Number of shares in issue |
|
335,768,782 |
261,795,015 |
NAV per share (pps) |
|
139.08 |
136.93 |
The comprehensive income of the Company was £23,475,000 (2016:
£28,542,000).
These financial statements were approved by the Board of
Directors of GCP Student Living plc on 14
September 2017 and signed on its behalf by:
Robert Peto
Chairman
Company number: 08420243
The accompanying notes below form an integral part of these
Company financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June
2017
|
Share
capital
£’000 |
Share
premium
£’000 |
Special
reserve
£’000 |
Retained
earnings
£’000 |
Total
£’000 |
Balance at 1 July 2016 |
2,618 |
239,653 |
58,371 |
57,826 |
358,468 |
Profit for the year |
— |
— |
— |
23,474 |
23,474 |
Ordinary shares issued |
740 |
102,824 |
— |
— |
103,564 |
Share issue costs |
— |
(2,244) |
— |
— |
(2,244) |
Dividends |
— |
— |
(4,795) |
(11,473) |
(16,268) |
Balance at 30 June 2017 |
3,358 |
340,233 |
53,576 |
69,827 |
466,994 |
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June
2016
|
Share
capital
£’000 |
Share
premium
£’000 |
Hedging
reserve
£’000 |
Special
reserve
£’000 |
Retained
earnings
£’000 |
Total
£‘000 |
Balance at 1 July 2015 |
1,099 |
39,946 |
(214) |
65,223 |
31,675 |
137,729 |
Profit for the year |
— |
— |
— |
— |
28,328 |
28,328 |
Other comprehensive income that may be
reclassified subsequently to profit and loss |
— |
— |
— |
— |
— |
— |
Fair value movement on financial derivative |
— |
— |
214 |
— |
— |
214 |
Total comprehensive income |
— |
— |
214 |
— |
28,328 |
28,542 |
Ordinary shares issued |
1,519 |
201,251 |
— |
— |
— |
202,770 |
Share issue costs |
— |
(1,544) |
— |
— |
— |
(1,544) |
Dividends |
— |
— |
— |
(6,852) |
(2,177) |
(9,029) |
Balance at 30 June 2016 |
2,618 |
239,653 |
— |
58,371 |
57,826 |
358,468 |
The accompanying notes below form an integral part of these
Company financial statements.
COMPANY STATEMENT OF CASH FLOWS
For the year ended 30 June
2017
|
Notes |
30 June
2017
£’000 |
30 June 2016
£’000 |
Cash flows from operating
activities |
|
|
|
Operating profit |
|
23,434 |
34,811 |
Adjustments to reconcile profit for
the year to net cash flows: |
|
|
|
Gains from change in fair value of
subsidiary companies |
|
(16,599) |
(34,237) |
Dividends received from subsidiary
companies |
|
(11,119) |
(2,671) |
Corporation tax paid |
|
(24) |
— |
Net recharges from subsidiary
companies |
|
(2,012) |
(955) |
Decrease/(increase) in other
receivables and prepayments |
|
1,970 |
(2,035) |
(Increase)/decrease in other
payables and accrued expenses |
|
(218) |
1,018 |
Net cash flow used in operating
activities |
|
(4,568) |
(4,069) |
Cash flows from investing
activities |
|
|
|
Acquisition of subsidiaries, net of
cash acquired |
3 |
(109,947) |
(130,492) |
Net cash (paid to)/received from
subsidiary companies |
|
(2,421) |
5,933 |
Net cash used in investing
activities |
|
(112,368) |
(124,559) |
Cash flows from financing
activities |
|
|
|
Proceeds from issue of ordinary
share capital |
|
103,564 |
79,000 |
Share issue costs |
|
(2,244) |
(1,538) |
Proceeds from the issue of C
shares |
|
— |
16,195 |
C share issue costs |
|
— |
(2,490) |
Finance income |
|
68 |
71 |
Finance expenses |
|
(3) |
(1) |
Dividends paid in the year |
|
(16,206) |
(8,865) |
Net cash flow generated from
financing activities |
|
85,179 |
82,372 |
Net decrease in cash and cash
equivalents |
|
(31,757) |
(46,256) |
Cash and cash equivalents at start
of the year |
|
57,565 |
103,821 |
Cash and cash equivalents at end
of the year |
4 |
25,808 |
57,565 |
Non-cash items |
|
|
|
Long-term loan received from GCP
Topco Limited |
|
40,000 |
— |
Long-term loan granted to GCP Topco
2 Limited |
|
(40,000) |
— |
The accompanying notes below form an integral part of these
Company financial statements.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 30 June
2017
1. General information
GCP Student Living plc is a closed-ended investment company
incorporated in the UK on 26 February
2013. The registered office of the Company is located at
51 New North Road, Exeter EX4
4EP. The Company’s shares trade on the premium segment of the Main
Market of the LSE.
2. Basis of preparation
These financial statements are prepared in accordance with IFRS
issued by the IASB as adopted by the European Union. The financial
statements have been prepared under the historical cost convention,
except for investments in subsidiaries that have been measured at
fair value. The audited financial statements are presented in
Pound Sterling and all values are rounded to the nearest thousand
pounds (£’000), except when otherwise indicated.
These financial statements are for the year ended 30 June 2017. Comparative figures are for the
previous accounting period, the year ended 30 June 2016.
The Company has taken advantage of the exemption in section 408
of the Companies Act 2006 not to present its own income statement
or statement of comprehensive income.
The financial statements of the Company follow the accounting
policies laid out above and below.
3. Investment in subsidiary
companies
|
30 June 2017
£’000 |
30 June 2016
£’000 |
At the beginning of the year |
305,574 |
140,492 |
Investment in subsidiary companies |
109,947 |
130,845 |
Total acquisitions |
109,947 |
130,845 |
Fair value gains on the revaluation of subsidiary
companies |
16,599 |
34,237 |
Total |
432,120 |
305,574 |
Investment in and transfers of
subsidiary companies
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Investments in subsidiary companies |
|
|
GCP SG Limited |
— |
19,047 |
GCP RHUL Limited |
— |
16,288 |
GCP Holdco Limited |
— |
76,652 |
GCP WL Limited |
— |
18,858 |
GCP Wembley Limited (formerly GCP Apex
Limited) |
60,000 |
— |
GCP Bloomsbury Limited |
49,947 |
— |
|
109,947 |
130,845 |
Cash items included in cash flow |
|
|
GCP Holdco Limited |
— |
76,446 |
GCP SG Limited |
— |
18,888 |
GCP RHUL Limited |
— |
16,300 |
GCP WL Limited |
— |
18,858 |
GCP Wembley Limited (formerly GCP Apex
Limited) |
60,000 |
— |
GCP Bloomsbury Limited |
49,947 |
— |
Total |
109,947 |
130,492 |
During the year, the Company invested £50 million in GCP
Bloomsbury Limited to enable this company to acquire Woburn Place,
and £60 million in GCP Wembley Limited (formerly GCP Apex Limited)
to finance the construction of Scape Wembley.
Accounting policy
Investments in subsidiary companies which are all 100% owned by the
Company are valued at NAV, which is equivalent to fair value.
Changes in fair value of investments and gains on the sale of
investments are recognised as they arise in the Company statement
of comprehensive income.
4. Cash and cash equivalents
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Cash and cash equivalents |
25,808 |
57,565 |
Total |
25,808 |
57,565 |
Accounting policy
Cash and cash equivalents comprise cash at bank and short?term
deposits with banks and other financial institutions, with an
initial maturity of three months or less.
5. Trade and other receivables
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Amounts due from subsidiary companies |
55,413 |
— |
Prepayments and other receivables |
69 |
40 |
Amounts held on deposit |
— |
2,000 |
Total |
55,482 |
2,040 |
6. Other payables and accrued
expenses
|
30 June 2017
£’000 |
30 June 2016
£’000 |
Amounts due to subsidiary companies |
44,533 |
4,691 |
Other expenses payable |
1,883 |
2,020 |
Total |
46,416 |
6,711 |
7. Fair value
IFRS 13 defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement
date. The following methods and assumptions were used to estimate
the fair values.
The fair value of cash and short-term deposits, amounts due to
and from subsidiary companies and other current liabilities
approximate their carrying amounts due to the short-term maturities
of these instruments.
Quarterly valuations of subsidiaries are based on NAV. The NAV
of the subsidiaries are based on fair values of the assets held by
the subsidiary, refer to note 25 to the Consolidated Financial
Statements for details of underlying asset fair values.
The following tables show an analysis of the fair values of
financial instruments recognised in the statement of financial
position by level of the fair value hierarchy1:
|
30
June 2017 |
Assets and liabilities measured at fair value |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
Investment in subsidiaries |
— |
— |
432,120 |
432,120 |
Total |
— |
— |
432,120 |
432,120 |
|
30 June
2016 |
Assets and liabilities measured at fair value |
Level 1
£’000 |
Level 2
£’000 |
Level 3
£’000 |
Total
£’000 |
Investment in subsidiaries |
— |
— |
305,574 |
305,574 |
Total |
— |
— |
305,574 |
305,574 |
-
Explanation of the fair value hierarchy:
- Level 1 – quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access at the
measurement date;
- Level 2 – use of a model with inputs (other than quoted prices
included in Level 1) that are directly or indirectly observable
market data; and
- Level 3 – use of a model with inputs that are not based on
observable market data.
ANNUAL GENERAL MEETING
The Company's Annual General Meeting will be held at the offices
of Gowling WLG (UK) LLP, 4 More London Riverside, London SE1 2AU at 12.00 noon on
Wednesday, 25 October 2017.
The notice of this meeting will be circulated to shareholders
with the full annual report and financial statements and will also
be available at www.graviscapital.com/funds/gcp-student.
NATIONAL STORAGE MECHANISM
A copy of the annual report and financial statements and Notice
of AGM will be submitted shortly to the National Storage Mechanism
("NSM") and will be available for inspection at the NSM, which is
situated at www.morningstar.co.uk/uk/NSM.
GLOSSARY OF KEY TERMS
AIC |
Association of Investment
Companies |
AIC Code |
AIC Code of Corporate
Governance |
AIC Guide |
AIC Corporate Governance Guide
for Investment Companies |
AIFM |
Alternative Investment Fund
Manager |
AIFMD |
Alternative Investment Fund
Managers’ Directive |
CO2e |
Carbon dioxide equivalent |
Collegiate |
Collegiate Accommodation Consulting
Limited – Asset and Facilities Manager for Water Lane
Apartments, Bristol |
Company |
GCP Student Living plc |
Cost of borrowing |
Cost of borrowing expressed as a
percentage weighted according to period drawn down |
CRM |
Corporate Residential Management
Limited – Asset and Facilities Manager for The Pad until
31 August 2016 |
C shares |
Convertible redeemable preference
shares of one pence each in the capital of the Company |
CTA |
Corporation Tax Act 2010 |
EPRA |
European Public Real Estate
Association |
EPRA EPS |
Recurring earnings from core
operational activities excluding movements relating to revaluation
of investment properties and interest rate swaps and the related
tax effects, divided by the number of shares in issue |
EPRA NAV |
Includes all property at market
value but excludes the mark to market of interest rate
swaps |
EPRA NAV per share
ex-income |
Net asset value after deduction of
proposed dividend |
EPS |
Earnings per share |
ERV |
Estimated rental value |
EU |
European Union |
FPP |
Financial position and
prospects |
FRC |
Financial Reporting Council |
FRI |
Full repairing and insuring |
GHG |
Greenhouse gas |
Gross assets |
The aggregate value of the total
assets of the Company |
Group |
GCP Student Living plc and its
subsidiaries |
HEI |
Higher education institution |
HMRC |
HM Revenue & Customs |
IASB |
International Accounting Standards
Board |
IFRS |
International Financial Reporting
Standards |
IPO |
Initial public offering |
JLL |
Jones Lang LaSalle Inc |
kWh |
Kilowatt hour |
Loan-to-value |
Debt expressed as a percentage of
gross assets |
LSE |
London Stock Exchange |
MAR |
Market Abuse Regulation |
Migration |
The migration of the Company’s
shares to a premium listing on the Official List, and a transfer to
trading on the Premium Segment of the Main Market of the LSE, which
took effect on 16 September 2016 |
NAV |
Net asset value |
Net operating margin |
Gross profit divided by rental
income given as a percentage figure |
OECD |
Organisation for Economic
Co-operation and Development |
PGIM |
PGIM Real Estate Finance |
PID |
Property income distribution |
Portfolio total return |
Unleveraged weighted capital and
income return of the investment portfolio weighted by net
rental income |
PPS |
Pence per share |
QMUL |
Queen Mary University of London |
REIT |
Real Estate Investment Trust |
Rental growth |
Annual rental growth measured on a
like-for-like basis across the portfolio |
RHUL |
Royal Holloway, University of
London |
RICS |
Royal Institution of Chartered
Surveyors |
RNS |
Regulatory news service |
RPI |
Retail price index |
Scape |
Scape Student Living Limited – Asset
and Facilities Manager for Scape Shoreditch, Scape East, Scape
Greenwich, Scape Surrey, Scape Wembley and The Pad (with effect
from 1 September 2016) |
SFS |
Specialist Fund Segment of the Main
Market of the LSE |
Total shareholder return |
Share price growth with dividend
deemed to be reinvested on the dividend date |
UCAS |
Universities and Colleges Admissions
Service |
UK CODE |
UK Code of Corporate Governance |
UKLA |
United Kingdom Listing
Authority |
ENDS
Neither the contents of GCP Student Living plc's website nor the
contents of any website accessible from hyperlinks on the website
(or any website) is incorporated into, or forms part of, this
announcement.